Discuss the ways to control the risks of holding long-term direct investments

Direct investments in private companies, infrastructure or real estate carry concentration, illiquidity, valuation, operational, governance and reputational risks. Controls start with thorough due diligence and clear investment criteria. Investors can diversify across sectors, regions and vintages, co-invest with experienced partners to share expertise and risk, and negotiate governance rights such as board seats, veto powers and information rights. Contractual protections, covenants, staged commitments and exit options limit downside. Hedging can reduce currency and interest rate exposure. Ongoing monitoring, independent valuation and ESG integration catch problems early. The recommendation should suit the institution's in-house capabilities. A trap is assuming a long horizon removes risk; illiquidity means problems cannot be exited quickly.