​Investment decisions can be complicated and there are many factors to consider when deciding where to allocate funds. As well as analysing the risks and returns, investors must also assess the liquidity of an investment – meaning how easily they can sell their allocation if they need to. Some assets are highly liquid – such as cash, or shares traded on big exchanges. Others are much harder to exit, such as real estate and private equity markets, and a lack of liquidity carries risk. History has some spectacular examples of illiquidity bringing down the smartest investors, such as Long-Term Capital Management in the 90s.

A lack of liquidity has traditionally been a big barrier to investing in private markets. At some point, liquidity is always needed, but the infrastructure simply hasn’t been in place to support this efficiently. In some cases, there’s been no liquidity at all. Any transactions that did take place did so manually and laboriously – often managed by spreadsheets. To successfully liquidate a position in the secondary market requires the ability to line up all necessary intermediaries to facilitate settlement, from cash custody to individually drafted contracts. In some countries, like the UK, this is even more lengthy and complicated due to additional tax and regulatory overheads, such as stamp duty on secondary transactions in shares of a private company.