Excess yield earned for holding assets without a liquid secondary market — the LP cannot exit at par on demand and must hold to maturity (or wait for prepayment). For US middle-market direct loans, the estimated illiquidity premium is 150–250 bps over comparable broadly syndicated loans, and roughly 250–400 bps over investment-grade bonds. The premium is partly a structural illiquidity rent (lenders earn it for capital lockup) and partly compensation for the bilateral-information asymmetry inherent in private debt.