The Most Important Quality to Look for in a Liquidity Provider
As the market continues to recover, private fund investment advisors with a long-term perspective understand that providing liquidity—and therefore, partnering with a reliable liquidity provider—is essential. Locating the right liquidity provider means conducting a detailed analysis of several firms and what they have to offer, from pricing to the quality of their bids to the integrity of their IT systems. The following seeks to provide financial services professionals with a framework for evaluating and selecting the best liquidity provider for their needs.
Table Stakes for Liquidity Providers
In a rapidly evolving market, liquidity providers should develop creative solutions for a diversity of investment advisors who range in size, target market, and business model. While every liquidity provider will offer their own menu of proprietary bells and whistles, all reputable providers should be able to speak to the following factors:
- Proven history of excellent pricing, quality bids and competitive spreads.
- Lack of expensive fee structures allowing for more attractive net prices.
- Reliable data feeds with few or no spikes or gaps.
- High-quality bids that are stable through market uncertainty.
- Compliant conduct, with transparent reporting and records, and strict adherence to regulatory requirements.
- Secure technology platform with outstanding surveillance.
Flexibility is the Biggest Differentiator in Liquidity Providers
Competition among liquidity providers is high, and the best candidates will come to the table with features that go above and beyond the minimum offering. Flexibility may be the most critical factor, since the “best” provider is the one who makes the most financial sense for you or your firm. What liquidity solutions can a given provider offer given the size of your fund? Can they accommodate a shorter timeline? Do they work with alternative assets? Make sure that you have a clear understanding of your needs and articulate them honestly when meeting with a potential liquidity company. Their willingness to accommodate your ask should clue you in to their willingness to be flexible when the time comes to draw up a plan.
At Ben, we have crafted a suite of reliable, ongoing liquidity solutions that seek to provide private fund investment advisors with the flexibility needed to address the unique challenges they face. Our process allows investors to access hard-earned investment capital, with liquidity provided from our own balance sheet. Contact us today to schedule a consultation with our expert team.
The 'best' liquidity provider is the one who makes the most financial sense for you or your firm."