Proper assessment of the liquidity a particular investment vehicle has must include the knowledge of who the other investors in the vehicle are, according to Australian Unity Investments managing director David Bryant.
"There are some funds that co-mingled multi-hundred million dollar institutions with people like you and me in the one fund," Bryant told InvestorDaily.
"If you or I go it's a mosquito bite on the back of an elephant. But if one of the big investors go then the elephant has moved on," he said.
"So, in this case, just because one person changes their mind liquidity just evaporates for everyone. So you have to make sure you know who the other investors are."
While it is important for investors to have this knowledge, for fund managers it is important to offer regular liquidity redemptions for the fund they are providing to give investors a level of comfort, Bryant said.
"There is a very strong behavioural issue in that the more you put forward liquidity, the less people want it because they will have confidence it will be there when they do need it," he said.
He pointed out this did not have to be daily liquidity and that periodic liquidity would have the desired effect.
"Even if it took two or three quarters I think people would be okay with that, but if they don't know when and they don't know how much, and they don't know what the result may be, then the attitude would be to take it now because when liquidity may be needed it might not be available," Bryant said.
