Alts asset managers re-evaluate their exit strategies
96 per cent of asset managers working in alternative investments, senior executives at major companies, family offices and wealth managers are re-evaluating their exit strategies due to macro-economic changes.
According to new research from fund administrator Ocorian, the re-evaluation stems from the changing interest rate environment, changing political leadership, falling inflation and ongoing geopolitical tensions.
Almost six in ten (59 per cent) of the investors surveyed said they expect to bring forward their exits in response to the current environment. Meanwhile, 36 per cent are either redesigning or re-evaluating their exits, while only 20 per cent are planning to extend their exit plans.
“In today’s economic climate, where interest rates have seen significant adjustments after years of near-zero rates, the industry is navigating a complex exit landscape,” said Charlotte Cruickshank, global head of fund onboarding and solutions at Ocorian.
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“As with 59 per cent of our survey responses, exits have been brought forward as the cost of debt have soared, reducing the company’s free cash flow and profitability.
“The higher cost of capital has also muted enthusiasm for leveraged purchases, leading managers to hold on to assets for longer, waiting for more favourable market conditions or looking for alternative exit strategies.”
Furthermore, 95 per cent of asset managers working across private equity, venture capital, real estate, infrastructure and private debt said that the current interest rates have impacted their company and asset valuations, with 40 per cent saying that current interest rates have had “a significant impact”.
However, Cruickshank added that there are other factors beyond interest rate changes that are having an impact on company valuations.
95 per cent of those surveyed said that the changing political leadership in their home country has had an impact on their company and asset valuations, with 60 per cent saying this change has had a significant impact.
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95 per cent also said that rising asset valuations and falling risk premiums represent a major issue for them, while 92 per cent said geopolitical conflict is a key consideration, and 81 per cent pointed towards the lower rate of inflation.
However, despite this, none of the asset managers questioned said their organisation’s current valuation cycle would negatively impact their fundraising efforts.
Almost seven in 10 (69 per cent) said that their organisation’s current valuation cycle will have a positive impact on their fundraising efforts, while seven per cent said that it would be “very positive”.
“We’re encouraged by the positive sentiment, clearly even in uncertain economic times there are opportunities to navigate these waters effectively,” added Cruickshank.
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