Illiquidated

Describes an asset, investment, or financial position that cannot be readily converted into cash without a substantial loss of value or a significant delay. Illiquidation often stems from a lack of a ready market or demand for the asset. It signifies that realizing the asset's nominal value quickly is difficult, implying potential risks in situations requiring immediate access to funds. This state can create financial vulnerability, especially in times of economic stress or emergencies. The term relates closely to the 'liquidity' of an investment, its ease of conversion into cash.

Illiquidated meaning with examples

• The real estate market was sluggish, making the property an illiquidated asset for the investor. Selling at the desired price would have taken months, preventing him from quickly accessing his capital to fund his new business venture. This lack of immediate liquidity created a significant hurdle for his plans and led to financial stress.
• The company's portfolio consisted of illiquidated private equity investments. Although these assets held long-term growth potential, converting them into cash to cover short-term debts proved challenging. The delayed conversion created a substantial risk of facing late payment penalties and straining the company's overall financial health.
• During the economic downturn, many homeowners found themselves with illiquidated mortgages. Falling property values and a difficult market prevented them from refinancing or selling their homes without significant financial losses. This trapped equity further compounded their financial difficulties and increased the risk of foreclosure.
• The collector held a vast collection of illiquidated fine art, which had a substantial estimated value, but the market for it was slow. Selling the pieces would have involved time-consuming auctions and potential price fluctuations. The illiquidity posed a challenge in accessing the funds needed for other investment opportunities.