Why even substantial wealth can feel inaccessible — and how to design portfolios that stay agile.
For many high-net-worth individuals (HNWIs) in the United States, impressive balance sheets often conceal an uncomfortable truth: much of their wealth is locked away. Real estate, private equity, business ownership, and long-term retirement vehicles build paper wealth — but not always accessible capital. The result is a paradox of modern affluence: being “asset-rich” but “cash-poor.”
When Wealth Isn’t Accessible
Illiquidity arises when assets can’t be easily converted into cash without incurring delays, penalties, or value loss. For affluent investors, this commonly includes:
- Equity in privately held businesses
- Real estate or development property
- Private equity and venture capital commitments
- Restricted stock and deferred compensation plans
- Collectibles, art, or specialty assets
A study by the Federal Reserve Bank of Richmond notes that as household wealth increases, portfolio composition shifts heavily toward private business ownership and property, both of which are among the least liquid asset classes. The challenge, then, isn’t the absence of value but the inability to mobilize it efficiently.
The “Paper Wealth” Paradox
The Brookings Institution’s “Wealthy Hand-to-Mouth” research found that many affluent households hold significant illiquid wealth but minimal cash buffers, behaving like households with little discretionary liquidity. In practice, this means a multimillion-dollar investor might still struggle to fund large, time-sensitive opportunities or unexpected expenses without liquidating long-term positions.
That liquidity gap can have cascading effects — delayed investments, stress sales, and loss of flexibility during market dislocations. In today’s environment of elevated rates and geopolitical uncertainty, agility has never been more valuable.
Why Illiquidity Risk Is Rising
The structure of modern wealth has changed.
According to a Goldman Sachs Private Wealth Survey (2025), over 60% of U.S. HNWIs now hold allocations to alternatives such as private equity, private credit, and real assets — instruments known for long lock-ups. Simultaneously, only about one-fifth of total wealth sits in liquid or near-liquid form.
Add to this the rising cost of leverage and increasing personal obligations — from philanthropy to intergenerational transfers — and it becomes clear: illiquidity is no longer a marginal issue; it’s central to portfolio resilience.
The Real Cost of Being Cash-Poor
When liquidity is constrained, the cost isn’t always visible on a balance sheet. It shows up as missed opportunities, delayed actions, and inflexibility.
- Forced sales: When capital calls or emergencies arise, investors may be forced to sell assets at depressed values.
- Missed opportunities: During market corrections, cash is king — but only for those who have it ready.
- Psychological drag: A portfolio that looks strong on paper but feels rigid in practice can erode confidence and long-term discipline.
Even a Federal Reserve Bank of St. Louis commentary highlights that aggregate liquidity measures mask deep disparities — many wealthy households still have illiquid wealth structures that reduce their ability to respond swiftly to market or personal shifts.
Tailoring Liquidity to Life Stages
Liquidity needs evolve across an investor’s lifecycle:
- Early Career / Accumulation Phase: Lower immediate obligations allow for greater allocation to illiquid assets like private equity or real estate.
- Mid-Career / Peak Earning Phase: Growing family responsibilities and lifestyle commitments make liquidity more critical. A combination of cash reserves and borrowing options is recommended.
- Pre-Retirement / Transition Phase: Approaching retirement, individuals should reassess liquidity for lifestyle expenses, healthcare, and potential capital calls, while still maintaining growth.
- Retirement / Distribution Phase: The focus shifts to income stability and preserving wealth. Balancing liquid assets with illiquid holdings ensures consistent cash flow without sacrificing long-term goals.
Building Liquidity Into a High-Net-Worth Portfolio
For HNWIs, the goal isn’t to avoid illiquid assets — they remain influential long-term wealth creators. The key is balance and intentional design.
- Define your liquidity threshold.
- Maintain a predetermined percentage of your net worth — often 10–20% — in highly liquid instruments like money-market funds or short-term Treasuries.
- Match liquidity with life stages and obligations.
- Map upcoming expenses, philanthropy, or estate needs against accessible capital. Liquidity planning should anticipate life events, not react to them.
- Stagger private commitments.
- Layer investments in private funds with differing maturity dates to avoid liquidity “cliffs.”
- Leverage smartly.
- Tools like securities-backed credit can enhance flexibility but must be aligned with asset volatility and rate cycles.
- Stress-test liquidity.
- Ask: “Could I access 25% of my net worth within 90 days without heavy loss?” If not, your structure may be too rigid.
The Quantel Perspective
At Quantel Asset Management, we believe liquidity is not a defensive asset — it’s a strategic one.
Our portfolios are designed to balance long-term value creation through private markets with real-time deployable capital for agility. Using quantitative liquidity modeling and dynamic rebalancing, we help clients avoid the “wealth trap” of over-concentration in illiquid assets.
Because true prosperity isn’t about how much wealth you have — it’s about how much control you retain over it.
Conclusion: Liquidity Is Freedom
Illiquidity remains one of the least discussed, yet most consequential, risks for U.S. HNWIs. In an era of rapid market shifts and evolving personal goals, accessible capital defines financial independence.
The most successful investors aren’t just those who build wealth, but those who can use it when it matters most.
