Complexity and illiquidity premia

Time: the interval between acquisition and realisation of the flow, discounted at the investor's target rate.

Value uncertainty: the spread between the conservative and base recovery scenarios.

Illiquidity: the absence of a deep secondary market prevents early exit at a predictable price.

Operational complexity: the cost of diligence, structuring, independent legal advice and monitoring.

Documentary and procedural risk: the possibility that enforceability is narrower than it appears.

The seller knows the asset better than the buyer. In non-performing portfolios and judicial claims, that asymmetry is structural, not accidental.

Diligence exists to reduce it to a tolerable level — never to eliminate it. What cannot be verified must be priced or addressed through contractual protection.

An advisor that does not acquire the asset has no interest in how the price is formed. That is the structural difference between an intermediary and a counterparty.

For the seller, it means pricing is not contaminated by self-interest in buying. For the investor, it means the analysis presented was not built to justify a position already taken.

This page describes the economic logic of pricing complex assets in qualitative terms. It does not present, and must not be read as, any indication of return, target profitability or expected outcome for any transaction.

Every investment decision should be preceded by complete due diligence, conducted by advisers independent of the investor.