Author Topic: Illiquid investments-anyone do/have these?  (Read 3329 times)

RosieTR

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Illiquid investments-anyone do/have these?
« on: February 02, 2016, 05:22:47 PM »
A friend of mine is going to an educational seminar on illiquid investments that may generate higher returns than liquid bonds, with potentially less volatility than stocks. The friend mentioned this to me, asking if I would want to go to this? This friend is FIRE'd and used to work in the financial industry, so far greater than the average person's general knowledge.

While I am all for education, and it is supposed to be strictly educational (at least, at this point), the thing would be a big PITA to go to. Like, have to take 1/2 day off work sort of thing, since it's far away in the middle of a work day.

If I were interested, I would only be thinking a small portion of our investments-like 2%. I can see the potential upside-yes, folks are potentially paying a premium for liquidity, and tying up a portion of your money in longer-term, illiquid assets may improve yield (because it increases risk of course). However, not sure on fee structure, and just HOW illiquid the things are: 5 years minimum? 10 years minimum?

Anyway, I was wondering if this sounds like anything you've come across and whether there's a decent chance finding out more would be worth it, or not. I'm sort of disinclined and could just say I can't get that day off work, but just kinda curious with the folks here.

Tom Bri

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Re: Illiquid investments-anyone do/have these?
« Reply #1 on: February 02, 2016, 06:40:57 PM »
No real, upfront description of what investments these might be?

bigchrisb

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Re: Illiquid investments-anyone do/have these?
« Reply #2 on: February 02, 2016, 07:03:46 PM »
I've had a bit of exposure to illiquid investments - private companies (actually my former employer) and syndicated commercial real estate.  I've done well out of them over the longer term, but you have to be OK with your money being locked up and out of your control - hence the theoretical returns premium.  It's also hard to get enough different buckets to adequately diversify these types of opportunities, as usually you need to find the good ones - be skeptical of the ones that find you.

Do your due diligence, and keep it to a portion of your portfolio that you would be ok with losing (as it may be locked up for 10 years plus).


GrowingTheGreen

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Re: Illiquid investments-anyone do/have these?
« Reply #3 on: February 02, 2016, 08:20:41 PM »
"Seminars", especially "free" ones, always raise red flags for me. Approach with caution. Just because someone majored in finance, doesn't mean they can't be duped :)

Me? I'd pass.

PhysicianOnFIRE

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Re: Illiquid investments-anyone do/have these?
« Reply #4 on: February 02, 2016, 09:16:28 PM »
I own a small portion of a craft brewery.  Less than 2% of my portfolio.

One one hand, it might be difficult to sell, hence, illiquid.

On the other hand, it pays dividends in beer.  It doesn't get much more liquid than beer.

Cheers!
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bearkat

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Re: Illiquid investments-anyone do/have these?
« Reply #5 on: February 03, 2016, 07:46:53 AM »
Middle of the work day ... Outside of town ... "Free" seminar ... Illiquid ...

If you like that, you'll love my rattlesnake essential oils! Shines your boots, makes you smart, and helps make you rich! I'll give you my address and you can drop off your money at my house (you're taking the day off work anyway, right?). I'll lock up your "investment" for you for 10 years while I "secure your returns" in Cabo.


RosieTR

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Re: Illiquid investments-anyone do/have these?
« Reply #6 on: February 03, 2016, 12:03:20 PM »
Thanks for the replies!

The friend made clear he isn't a broker/dealer and does not want to be, so this is definitely NOT a selling situation from him. However, the seminar/lunch thing makes me think that if I were going to go in, the fees would be steeper than I'm happy with. I think this is part of the FIRE strategy the friend has done, and by finance I mean was not a low-level grunt shuffling paper work. So, I don't think the friend is a shyster...we've had several conversations about investments and such because we like discussing it, and would not be particularly offended if I didn't do this.

But, it's a PITA to go to the thing, there's a little bit of a "what do they want" feeling like one might get from a timeshare talk, and then there's the fact that actually I have REIT and annuity options in my employer retirement plan, so if I want something like that (and I do) I can put some portion into that (and I have).

OTOH, if there's an option to potentially own part share in a craft brewery....well, then it might be worth taking a half day off work! ;-)

Retire-Canada

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Re: Illiquid investments-anyone do/have these?
« Reply #7 on: February 03, 2016, 01:00:03 PM »
OTOH, if there's an option to potentially own part share in a craft brewery....well, then it might be worth taking a half day off work! ;-)

Why? It would a lot less risky and likely less expensive to just buy a 6 pack from a craft brewery when you want one.

beltim

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Re: Illiquid investments-anyone do/have these?
« Reply #8 on: February 03, 2016, 01:07:38 PM »
OTOH, if there's an option to potentially own part share in a craft brewery....well, then it might be worth taking a half day off work! ;-)

Why? It would a lot less risky and likely less expensive to just buy a 6 pack from a craft brewery when you want one.

Sure.  Also less fun and with less upside.

Rosie, I think you'd identified the major upsides and downsides of this sort of opportunity in general.  How attractive or unattractive the actual investment opportunity is depends on the specifics.

Retire-Canada

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Re: Illiquid investments-anyone do/have these?
« Reply #9 on: February 03, 2016, 01:19:24 PM »
Sure.  Also less fun and with less upside.

I'd argue the less upside since you will be able to invest the money you didn't put into the brewery into other more conventional investments that are less risky and more likely to see positive returns.

I don't try and have "fun" with my investments. That said I'd have more "fun" drinking the 6 pack at retail prices while buying ETFs online. ;)

MsSindy

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Re: Illiquid investments-anyone do/have these?
« Reply #10 on: February 03, 2016, 01:23:23 PM »
I have part of my portfolio in non-liquid assets - invested in a private fund for 3 years at a time with a 12% return - basically "mail-box" money.  So far, they have paid monthly and everything is good.  They have only been offering funds for the past 4 years, so not much of a track record.  But I have dealt with them on other matters and trust them.  However, even investing in this, it's only a small part of my portfolio as I still see it as risky - but so far, it's paying off.

And yes, I believe even they held "information sessions" to present their fund to a wider audience of accredited investors.

Sometimes it's good to investigate something even if you don't act on it.  It opens up ideas of other investments you hadn't thought of before.  And if nothing else, it confirms that the investment strategy you're currently doing is right for you.

I guess, if it piques your interest enough, then go!  Otherwise, just go about your business and don't give it another thought.

beltim

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Re: Illiquid investments-anyone do/have these?
« Reply #11 on: February 03, 2016, 01:32:37 PM »
Sure.  Also less fun and with less upside.

I'd argue the less upside since you will be able to invest the money you didn't put into the brewery into other more conventional investments that are less risky and more likely to see positive returns.

But less likely to see greater than market returns.

Quote
I don't try and have "fun" with my investments. That said I'd have more "fun" drinking the 6 pack at retail prices while buying ETFs online. ;)

That's fine, but it's clearly a personal preference.

RosieTR

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Re: Illiquid investments-anyone do/have these?
« Reply #12 on: February 03, 2016, 08:31:33 PM »
I have part of my portfolio in non-liquid assets - invested in a private fund for 3 years at a time with a 12% return - basically "mail-box" money.  So far, they have paid monthly and everything is good.  They have only been offering funds for the past 4 years, so not much of a track record.  But I have dealt with them on other matters and trust them.  However, even investing in this, it's only a small part of my portfolio as I still see it as risky - but so far, it's paying off.

And yes, I believe even they held "information sessions" to present their fund to a wider audience of accredited investors.

Sometimes it's good to investigate something even if you don't act on it.  It opens up ideas of other investments you hadn't thought of before.  And if nothing else, it confirms that the investment strategy you're currently doing is right for you.

I guess, if it piques your interest enough, then go!  Otherwise, just go about your business and don't give it another thought.

Very useful advice! I do think I will pass since it involves the half day off work, etc. I may tell them I'd potentially be interested down the line, but that the timing is bad right now. I tend to not do things, rather than do things, if I'm uncertain. Which makes me frugal but possibly excessively risk-averse!

As for the brewery...that was a joke :-) My husband has a "brewery" in the basement (20 gal of beer and mead fermenting right now!). Plenty of cheap, cheap drinking.