Explain how an investor with a long horizon can harvest the illiquidity premium over time

Investors with long horizons and stable liabilities, such as endowments, can hold assets that others avoid because they cannot be sold quickly: private equity, private credit, real estate and infrastructure. In return they expect a premium over comparable liquid assets. Earning it takes discipline: committing steadily across vintage years, selecting managers carefully (private fund returns vary widely, so manager selection can matter more than the premium itself), and keeping enough liquidity to avoid forced sales at a discount. Reported returns are smoothed by appraisal-based valuations, which understates volatility and correlation, and fees can absorb much of the premium. The trap is assuming illiquidity pays automatically; the premium goes only to investors who can genuinely hold through stress.