Investment Alchemy: Making the Illiquid Liquid

Quickly turning an investment into cash, or easily switching out of cash and into another asset, is the definition of liquidity.

Last time, we looked at how investors take liquidity for granted during good times when it’s present and only notice its absence during times of panic when it dries up. This time, let’s look at another aspect of liquidity, which is taking investments that by their nature are illiquid and making them liquid through financial engineering—and the dangers associated with such a transformation.