What is a key disadvantage of being an investor in private equity?

High liquidity risk is indeed a key disadvantage of being an investor in private equity. When investing in private equity, funds are typically locked up for long periods, often spanning several years, during which investors cannot easily sell their shares or withdraw their capital. This creates a situation where the investor does not have quick access to their money, making liquidity a significant concern.

In contrast, public equities can generally be bought and sold with relative ease on stock exchanges, providing a level of liquidity that private equity investments do not offer. Investors must be comfortable with this lack of immediate access to their capital, which can be challenging if they need to liquidate their investments for personal or financial reasons.

The context of comparing private equity to other forms of investment highlights this liquidity risk; while private equity might offer high potential returns, those returns come with a trade-off in terms of accessibility and flexibility in managing funds. The other options present different challenges but do not capture the essence of the liquidity risk that private equity investors face.