Exit by design: building liquidity into single-asset investments in vessels and projects

Families want a way out

Liquidity is a stated priority for family offices. In the RBC and Campden Wealth survey of North American family offices, 48% named improving liquidity as a primary objective for 2025 (RBC and Campden Wealth, 2025). J.P. Morgan found 12% of single family offices ranking liquidity as their top portfolio risk, and about 31% holding 10% or more in cash (J.P. Morgan, 2026).

Yet the main route into private assets locks capital away. J.P. Morgan found 67% of family offices using drawdown funds and 35% using evergreen funds, with long lock-ups limiting take-up (J.P. Morgan, 2026). Single assets add a further problem: there is no fund manager to arrange a sale, and no portfolio to sell from.

A market for exits does exist, and it is growing. Jefferies reported US$240bn of secondary transactions in private funds in 2025, up 48% on the year (Jefferies, February 2026). LP portfolios traded on average at 87% of net asset value, from 92% for buyout to 70% for real estate. Single-asset continuation vehicles, which let investors in one company or asset sell while others stay, exceeded half of continuation-vehicle volume for the first time.

Ships trade, but not on demand

Vessels have an active second-hand market, which projects do not. That market is not a reliable exit on a chosen date. Alizadeh and Nomikos (2003) studied the sale and purchase market for dry bulk vessels. They found that past price changes help predict trading volume: buyers and sellers become active after prices rise. Liquidity in ships therefore tends to appear when values are high, and to thin out when an owner most needs to sell.

Three tests for the way out

A family office can put numbers on its exit before it invests. Three published approaches help. The first measures what uncertain timing costs. The second measures what a forced sale costs. The third tests whether a planned refinancing will work.

Test 1. What does uncertain timing cost?

Ang, Papanikolaou and Westerfield (2013) model an asset that can only be sold at random moments, arriving at an average rate λ per year. The chance of being able to sell within t years, and the expected wait, are:

$$P(\text{sale possible within }t)=1-e^{-\lambda t},\mathbb{E}[\text{wait}]=\frac{1}{\lambda }$$

In their baseline case, a risk-averse investor who can trade on average once every ten years gives up about 22% of total wealth in certainty-equivalent terms. If the same ten-year interval were known in advance, the cost would be about 2.8%. Most of the cost comes from not knowing when the exit will come, not from the waiting itself.

This is the case for designing the exit before closing. A known date, such as the end of a charter or a scheduled refinancing, turns an uncertain wait into a planned one.

Test 2. What does a forced sale cost?

When an exit is not planned, the seller usually pays. Nadauld, Sensoy, Vorkink and Weisbach (2016) studied 700 secondary sales of private-equity fund stakes between 2006 and 2014. Buyers paid on average 86.2% of net asset value. Stakes in funds aged four to nine years sold at a discount of about 9%. In 2009 the average price fell to about 54% of net asset value. Discounts were larger for smaller funds, smaller transactions and weaker markets.

A discount on exit can be turned into an annual cost. If a seller accepts a discount d on value, and would otherwise have held for T more years, the return given up each year is approximately:

$$c\approx \frac{-\ln (1-d)}{T}$$

This is our own arithmetic, not a published model. At the study’s average discount of 13.8% and five remaining years, it gives about 3% a year. At the 2009 level, a 46% discount, it gives about 12% a year. The same logic applies to a single vessel or project, where buyers are fewer and discounts can be wider.

Test 3. Will the refinancing work?

For a single asset, a refinancing is often the cleanest exit. New debt repays old debt and returns equity to the family on a known date. The risk is that the asset is worth too little on that date to support the new loan.

The model below is our own illustration, in the structural tradition of credit models. If the asset’s value V follows a lognormal path with volatility σ and no expected growth, the probability that a lender offering a loan-to-value ratio L cannot cover the outstanding balance B_T at year T is:

$$P(L{V}_T<B_T)=N\left(\frac{\ln (B_T/(L{V}_0))+\frac{1}{2}{\sigma }^{2}T}{\sigma \sqrt{T}}\right)$$

Here V₀ is today’s value and N is the standard normal distribution. For example, take a balance at year five of 40% of today’s value, a refinancing loan-to-value of 60% and asset volatility of 20%. The probability that the refinancing falls short is then about 25%. The family should know this number, and the fall-back, before it signs.

Framework: the exit design matrix

Exit routes differ in two ways that matter to a family: whether the timing is known in advance, and whether the price is set by the market or by an agreed mechanism. Test 1 shows why timing matters most. Test 2 shows what an unplanned, market-priced exit can cost.

Route 1. Open-market sale of the asset

The company sells the vessel or the project when a buyer appears. For a vessel, this is the sale and purchase market; for a project, an M&A process. The price is whatever the market pays on the day. Timing is uncertain, and liquidity tends to be weakest when values have fallen.

Route 2. Sale of shares to other investors

The family sells its shares in the company, not the asset itself. Buyers are co-investors, the sponsor or new investors. Rights agreed at the start shape this route: a right of first offer, tag-along and drag-along rights, and a valuation method for transfers. A trading desk that matches buyers and sellers of shares makes this route usable in practice.

Route 3. Planned refinancing or sale on a set date

The exit date is written into the plan: a refinancing at the end of a charter or offtake contract, or a planned sale when a construction or ramp-up phase ends. The date is known; the price is the market’s on that date. Test 3 measures the risk that the refinancing falls short.

Route 4. Contractual exit at an agreed price

The strongest protection is a contract that sets both the date and the price mechanism: a put option to the sponsor, a buy-back at a formula price, or a purchase option for the charterer or offtaker at the end of the contract. Such terms are valuable and usually come at a cost elsewhere in the deal.

What’s the bottom line?

A single asset is not illiquid by nature. It is illiquid by default, when nobody plans the way out. Research shows that most of the cost of illiquidity comes from not knowing when an exit will be possible, and that unplanned sales in thin markets transfer value from seller to buyer.

The answer is to design the exit before the entry. At least one route with a known date, such as a planned refinancing, a sale at the end of a contract or an agreed option, should sit alongside the open-market and share-sale routes. Each should be tested with numbers before the family signs.

Summary

Family offices name liquidity as a priority, yet most private-market capital is committed through long-dated vehicles, and single assets have no fund manager to arrange a sale. Research shows that uncertain timing drives most of the cost of illiquidity, and that sellers in unplanned secondary sales accept discounts that are deepest in weak markets. Ships trade more after prices rise, so their market is not a dependable exit on a chosen date. Four routes lead out of a single asset: open-market sale, sale of shares, planned refinancing or sale on a set date, and contractual exit at an agreed price. Designing at least one route with a known date before closing, and testing it with numbers, is the core of exit by design.

This Insight is for general information only and does not constitute investment, legal or tax advice. Figures from public sources are as reported at the dates shown.