Wealth managers, family offices, and alternative asset managers are adjusting their exit strategies in response to the current interest rate environment, research from Ocorian has found.

Its study revealed that 96 per cent of professionals in these spaces were altering their exit strategies in light of the interest rate environment.

More than half (59 per cent) were anticipating bringing forward exits, while 20 per cent were extending them and 36 per cent were redesigning or reevaluating them.

“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,” explained Ocorian global head of fund onboarding and solutions, Charlotte Cruickshank.

“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 cashflow 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.”

When asking asset managers working across private equity, venture capital, real estate, infrastructure, and private debt about how current interest rates had impacted their firm and asset valuations, 95 per cent said they had seen an impact, with 40 per cent saying the impact was significant.

“As expected, our research shows that interest rates are having an impact on company valuations, however there are other factors also at play including change in political leadership and geopolitical issues,” Cruickshank stated.

Other issues cited by asset managers were changing political leadership (95 per cent), rising and falling risk premiums (95 per cent), geopolitical issues (92 per cent), and falling inflation (81 per cent).

Despite this, 69 per cent said their organisations current valuation cycle would have a positive impact on their fundraising efforts, while 32 per cent felt it would have a neutral impact.

“We’re encouraged by the positive sentiment, clearly even in uncertain economic times there are opportunities to navigate these waters effectively,” Cruickshank concluded.

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