The Dragon Turns Two: Revisiting Our Liquidity Research

This update to a paper published in 2022 reflects market movements from the past two years, to better understand how exposed investors are in 2024 to a potential liquidity event.

Blue and gray scales,


12 min read



Key takeaways

  • In 2022, inflation and interest rates rose, stocks and bonds fell, and net cash outflows further depleted portfolios’ liquid assets.
  • Markets rallied in 2023, but volatility rose. A drop in the volume of initial public offerings reflected weakness in the private markets.
  • Starting 2024, liquid assets were still well below 2021 peaks, largely because many investors had to sell liquid assets to fund capital calls and distributions.
  • Many portfolios are more exposed to a potential liquidity stress event following a market shock than they were at the end of 2021.
  • Several of our recommendations still apply: manage liquidity, be a provider of liquidity in times of stress, and consider trend-following strategies and long volatility.