Jump to content

how to account for illiquid holdings


Recommended Posts



This stems from the 2012 returns post.


It has been long bothering me as to how to calculate out "gains" in a portfolio when investing in illiquid positions. From my own experience (and I am not trying to talk up the stock, just outlining my own circumstances) SYTE makes up a sizable position in my own and accounts that I manage... Given that I get a performance based fee for the accounts that I manage (of family members), how should I add in gains from things like SYTE or other illiquid holdings? I would hate it if someone placed a market order and bid the price up by a lot on a few dollars worth of stock on the day that fees were calculated.


I bring this up, also, because if I were to liquidate my SYTE position tomorrow (which I won't do), I have no idea what would happen to the price: I would think it would go down precipitously, and I would probably lose money on it despite an averaging in well below present prices. Therefore, I don't know that using the market price is the best way to go about calculating things... The same could probably be said of, say, Parsad and ITEX (though, this is a guess).


I know at one point, Buffett simply was compensated on an investment based on the increase in book value, but, a lot of my illiquid positions are trading at huge discounts to book, so, that doesn't really seem like a fair way either, as changes in book value (while a decent metric) don't go lock step with intrinsic value.


I am sure that I am not the first one of us to run into this. I am hoping for a bunch of opinions as I don't want to screw any one, but at the same time, want to be treated fairly.

Link to comment
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now

  • Create New...