The paper examines the liquidity risk of a private equity firm that decides to dispose of a large holding in its portfolio. As the sale takes time, it requires a careful balancing act of the exposure to the fluctuations in the market value of the investment against the large sale-induced price...

We model the optimal liquidation behavior of a venture capital or non-diversified asset management firm faced with a sale of concentrated security holdings. As the firm?s stake is large, its sales can lead to permanent and temporary price depressions. At the optimum, the institution chooses the...