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Illiquidity: understanding the premium in fixed-income markets

Years of low interest rates have prompted fixed-income investors to look beyond traditional sources of yield and consider whether illiquid assets can boost returns. But while this illiquidity premium is widely discussed and increasingly sought, it has been inadequately measured and investors lack an understanding of how it operates in different conditions.

In the first instalment of a two-part paper, we discuss our favoured approach to quantifying the illiquidity premium and assess its behaviour during different market cycles.

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