ASSET ALLOCATION IMPLICATIONS OF ILLIQUID ASSETS

T. BERRADA*, O. SCAILLET* and Z. ZHANG**

* Université de Genève and Swiss Finance Institute ** Geneva Institute of Wealth Management

 

Abstract

In the wake of the global financial crisis, with low returns on traditional fixed income instruments, institutional investors seek alternative investment vehicles with similar characteristics. Illiquid assets, such as infrastructure and real estate, have become an increasingly important share of their investments. In this paper, we study the performance impact in term of diversification and return of introducing illiquid assets in an otherwise standard allocation.

Keywords: illiquid asset, asset allocation, mean-variance, constraints.