If you own shares in a mutual fund, you can get your money out in a few days. This is because the fund will redeem your shares on request, and has cash, liquid investments, and credit lines to guarantee its ability to do so. You have full liquidity.
If you own an interest in a private investment entity like a family limited partnership you may not be able to get your money out for many years. This is because the partnership agreement prohibits withdrawals, and, even if it does not, it might be invested in highly illiquid assets and lack cash, liquid instruments, and credit lines. You have very limited liquidity.
If you own an interest in a private equity (or hedge) fund, you MUST understand the subscription or operating agreement provisions that govern withdrawals in order to assess liquidity. Few such funds permit immediate withdrawals. Many provide quarterly or annual withdrawals, with advance notice of 30 to 90 days. Some permit no withdrawals until the fund liquidates.
I have seen appraisers get tripped up on liquidity discounts for private equity fund interests because they did not analyze withdrawal rights correctly. Don’t be one of them! Read the relevant agreements carefully. They often have liquidity restrictions as well as other complex provisions regarding management fees, carried interests, and other aspects that can make their valuations complicated.