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PCThe illiquidity point made by Peter above appears to have been confused with fund lock-ups, and Peter's point missed completely -- whilst hedge funds might lock-up their investors, the investments made by such funds are not locked-up. The investments may be more or less liquid compared to other investments, but that has nothing to do with an investor lock-up.
In any event, whilst one's ownership interests in a hedge fund might be illiquid due to a lock-up, one would expect the investments made by such funds to be rather more liquid.
How liquid is of course a matter of risk tolerance determined by the fund, but liquidity is an issue for realizing gains, and fund managers make their 20% on gains. And since that 20% is really the only thing the managers care about, liquidity is most certainly a key consideration.