Based on the search results, here are some specific risks associated with illiquidity that private debt managers may communicate to investors:
- Limited market discovery: Private debt loans are often less liquid than broadly syndicated loans, which can make it difficult for investors to understand the liquidity of the underlying assets 1 .
- Reduced merger and acquisitions activity: Reduced merger and acquisitions activity can lead to a buildup of dry powder in the private debt market, which can increase the risk of illiquidity 2 .
- Capital deterioration: Private debt returns on investment are directly related to the business’s success. Therefore, capital decay can impact the value of the investment and put investors at greater risk 3 .
- Weaker credit quality: Private debt investments may have weaker credit quality than public debt investments, which can increase the risk of illiquidity 3 .
- Limited secondary market: Private debt loans are typically not traded in a secondary market, which can make it difficult for investors to sell their investments if they need liquidity 1 .
In summary, private debt managers may communicate specific risks associated with illiquidity to investors, including limited market discovery, reduced merger and acquisitions activity, capital deterioration, weaker credit quality, and limited secondary market. By communicating these risks effectively, private debt managers can help investors make informed investment decisions and protect themselves from the risks associated with private debt investments.