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Answer: The share of lliquid assets in institutional portfolios has generally gone up in the past 2 decades.
C is correct. Both pensions and endowments have increased their holdings of alternative assets from about 5% to 20-25%. A is incorrect. Municipal bonds have less than 10% turnover, much lower than approximately 35% for OTC equities. B is incorrect. US real estate markets are large compared to the size of US stocks/bonds. D is incorrect. Liquidity dried up in both markets.
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A pension fund, constrained by the limited investment options available in public markets, has decided to hire an investment consultant to explore potential investment opportunities within the liquid markets of the United States. As part of the evaluation process, what specific characteristics and features of the illiquid markets in the U.S. should the consultant highlight and discuss with the pension fund managers?
A
Municipal bonds are usually more liquid than pinksheet over-the-counter equities.
B
The traditional public, liquid markets of stocks and bonds are larger than the total wealth held in illiquid assets.
C
The share of lliquid assets in institutional portfolios has generally gone up in the past 2 decades.
D
During the 2008-2009 Financial Crisis, liquidity dried up in repo markets but not in commercial paper markets.