The risk of illiquidity can be attractive—private equity has offered higher returns than publicly traded stocks. This leads to higher profits. So, the incremental risk is rewarded with incremental return. But illiquidity can cause major issues for family shareholders. Namely, time constraints.
Unlike stock, you can’t easily sell your investment and get your money back. It takes time. As Travis Harms points out, a family business may not receive any income while waiting for their investment to mature. And they may never be able to sell their investment for a good price. If investors access liquidity “ahead” of the schedule, then they will have to sell at a discount. An unideal situation for all. What can family businesses and family shareholders do to manage the burden of liquidity?
Travis Harms presents five tips on how to manage illiquidity in “Private Equity Investors Learn What Family Shareholders Have Always Known.” Click through to see where to start.
Read about five tips on how to manage illiquidity here.
Become a Member for Your Expertly Curated Advice
Joining the Family Wealth Library means access to the information the legacy builders need to navigate family dynamics and protect our wealth. We can keep what is ours by managing familial challenges and building trust and transparency.