At a glance
- Lynne Kostakis, executive director of alternative investments for wealth management at Northern Trust, said many private holdings stay illiquid for 10 to 15 years.
- Uncalled capital is easy to miss: on a $1 million commitment with $400,000 invested in year one, the manager can still call the remaining $600,000, and an heir who receives that interest takes on the obligation.
- Advisors need to know where that $600,000 will come from before the transfer, not after the first call, Kostakis said.
Heirs who inherit portfolios built around private equity, private credit and real assets also take on lockups, redemption caps and obligations for capital not yet called, InvestmentNews reported.
Lynne Kostakis, executive director of alternative investments for wealth management at Northern Trust, said many private holdings stay illiquid for 10 to 15 years. Funds marketed as semi-liquid typically limit redemptions to about 5% of the fund each quarter, she said.
Uncalled capital is easy to miss: on a $1 million commitment with $400,000 invested in year one, the manager can still call the remaining $600,000, and an heir who receives that interest takes on the obligation.
Advisors need to know where that $600,000 will come from before the transfer, not after the first call, Kostakis said. They also need to list every holding by individual and entity with the amount committed, what remains to be called and the role each plays.
Reported by the Tax & estate planning desk from InvestmentNews. Published . Corrections