As investors increasingly look to private markets for diversification and return potential, determining the appropriate balance between liquid and illiquid assets has become a key portfolio construction consideration. Capital Group examines the importance of maintaining sufficient liquidity while incorporating private investments, noting that the right allocation depends on an investor’s financial goals, time horizon, cash flow needs, and risk tolerance. The article emphasizes that liquidity should be viewed as a portfolio design tool rather than simply a limitation, with public market investments providing flexibility and private market allocations offering access to potentially attractive long-term opportunities.

The discussion highlights the growing role of “public-private” portfolio strategies that combine traditional investments with private market exposure. Rather than focusing solely on the percentage allocated to alternatives, investors and advisors should consider the overall liquidity profile of the portfolio, including expected cash needs, investment timelines, and the characteristics of underlying holdings. As access to private markets expands among wealth investors, thoughtful liquidity planning and education will remain essential components of effective alternative investment allocation.

Read the full article: “How much liquidity does your portfolio need?“