Liquidity is one of those investment considerations that tends to feel unimportant until it suddenly becomes the only thing that matters — and Toby Watson’s experience offers a clear-eyed perspective on why it deserves far more attention than it typically receives.
Most investment conversations focus on returns, asset allocation, and market timing. Liquidity — the ability to access capital when needed, at a reasonable cost — tends to be treated as a secondary concern, addressed only when a specific need arises. That approach has real costs, and they tend to materialise at the worst possible moments. Toby Watson, whose career placed him at the centre of some of the most significant liquidity events in modern financial markets, brings a practical and grounded perspective to why liquidity planning belongs at the heart of any serious wealth management approach.
Toby Watson is a Partner at Rampart Capital, an independent London-based investment office providing bespoke investment management and advisory services to wealthy individuals and families. His professional background includes nearly 17 years at Goldman Sachs, where Toby Watson worked across structured credit trading, principal funding, and global infrastructure financing — experience that included navigating the severe liquidity dislocations of 2008. That direct experience of how liquidity behaves under stress continues to inform his approach to portfolio construction at Rampart Capital today. Toby Watson also served as Chairman of Excalibur Academies Trust from 2018 until early 2026.
Why Liquidity Planning Deserves More Attention — Toby Watson on Getting It Right
Liquidity rarely features prominently in investment planning until something forces it to. In normal market conditions it is largely invisible — assets can be bought and sold, cash is available when needed, and the question of whether a portfolio is adequately liquid does not press itself. It is only when conditions change that the true cost of inadequate liquidity planning becomes apparent. The seven reasons below draw on Toby Watson’s experience to explain why liquidity planning deserves to be treated as a first-order consideration in any serious approach to wealth management.
Why is liquidity so consistently underweighted in investment planning?
Liquidity planning tends to be neglected because its costs are visible and its benefits are not — at least not until something goes wrong. Holding liquid assets typically means accepting lower returns than illiquid alternatives, and in a strong market that trade-off can feel unnecessary. What Toby Watson observed during his years at Goldman Sachs was that the cost of inadequate liquidity in a stress scenario almost always exceeds the cost of maintaining it — both financially and in terms of the strategic options it forecloses.
1. Liquidity Determines Whether You Can Act When It Matters Most
The ability to act — to hold through volatility, exit when appropriate, or deploy capital when genuine opportunities arise — depends directly on having adequate liquidity. Investors who are forced to sell during market dislocations lose not just the immediate sale proceeds, but the ability to participate in the recovery that typically follows. Preserving that optionality is one of the most tangible benefits of disciplined liquidity planning, and one that Toby Watson considers central to sound portfolio management.
2. Forced Selling Is One of the Most Damaging Investment Outcomes
When investors are compelled to sell assets at distressed prices, they lock in losses that a patient investor could have avoided. The situations that most commonly lead to forced selling include:
- Inadequate liquid reserves when unexpected personal or business obligations arise
- Margin calls or redemption requirements that cannot be met from cash holdings
- Concentration in illiquid assets that leaves no other source of capital when needs emerge
- Failure to stress-test the portfolio against scenarios where multiple liquidity needs arise simultaneously
Toby Watson considers avoiding forced selling one of the primary objectives of sound liquidity planning.
3. Illiquidity Risk Is Frequently Mispriced
The premium investors receive for accepting illiquidity is real, but it is not always sufficient compensation for the full range of risks that illiquid assets carry. The behaviour of illiquid assets under stress — when the need to exit is greatest and the ability to do so most constrained — is often not adequately reflected in expected return premiums. The experience Toby Watson developed at Goldman Sachs, working with instruments whose liquidity profiles shifted dramatically under stress, reinforced the importance of assessing illiquidity risk with genuine rigour.
4. Liquidity Needs Are Harder to Predict Than They Appear
Life events, business requirements, tax obligations, and unexpected opportunities all create demands on capital that may not have been anticipated when a portfolio was constructed. Building adequate liquidity requires stress-testing against a range of scenarios — including those that feel unlikely but whose consequences, if they materialise, would be significant.
Planning for the Unexpected
Toby Watson’s approach involves thinking about capital in layers — genuinely liquid reserves available at all times, a second layer accessible over a medium time horizon, and a third layer that is genuinely long-term and illiquid. That layered structure ensures short-term needs can be met without disrupting the long-term investment strategy, even when those needs arise unexpectedly.
5. Liquidity Affects Portfolio Behaviour Under Stress
When market conditions deteriorate and multiple asset classes come under pressure simultaneously, the liquidity profile of a portfolio determines how it can be managed. Investors with adequate liquidity can rebalance, take advantage of dislocations, and manage risk actively. Those without it are essentially passive — unable to make the adjustments the situation requires. The difference in outcomes between these two positions over a full market cycle can be substantial.
6. Liquidity Planning Protects Long-Term Investment Strategy
Adequate liquidity protects the long-term investment strategy from being disrupted by short-term needs. The characteristics of a well-structured liquidity framework include:
- Clear separation between capital needed in the short term and capital committed for the long term
- Sufficient liquid reserves to cover a realistic range of unexpected needs without touching strategic positions
- Regular reassessment of liquidity assumptions as both market conditions and personal circumstances evolve
- A consistent discipline of maintaining liquid buffers even when illiquid alternatives look more attractive
7. Liquidity Is a Form of Optionality With Real Value
Liquidity is not merely the absence of constraint — it is a source of genuine investment value. Investors with adequate liquidity can act opportunistically when others cannot, hold through volatility when others are forced to sell, and make decisions based on long-term analysis rather than short-term necessity. For Toby Watson, that optionality is one of the most consistently underappreciated assets in a well-constructed portfolio — and one that disciplined liquidity planning is designed specifically to preserve.
