An overwhelming majority (97%) of wealth managers and family office professionals are adjusting their exit strategies for investments in private equity, venture capital, real estate, infrastructure and private debt in response to higher-for-longer interest rates. This was the finding of a newly released survey from global financial services firm Ocorian conducted in October 2024.
The survey found that 57% of these respondents expect they will exit these investments earlier than previously anticipated due to the current interest rate environment. Another 30% reported having had to redesign or reevaluate their investments. Only 18% (less than one in five wealth managers and family office professionals) expect to extend the length of their anticipated holding periods.
“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,” Charlotte Cruickshank, global head of fund onboarding and solutions at Ocorian, said in a statement. “As with 59% of our survey responses, exits have been brought forward as the cost of debt has 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 favorable market conditions or looking for alternative exit strategies.”
Ocorian also found that 95% of asset managers working in private equity, venture capital, real estate, infrastructure and private debt said that current interest rates have impacted their company’s asset valuations. Of those, 40% said interest rates had a significant impact on valuations.
However, higher interest rates weren’t the only factor impacting valuations. The majority of those surveyed (95%) said the political leadership in their home country had an impact on asset valuations, along with fluctuating risk premiums (95%), geopolitical issues (92%) and declining inflation (81%).
In addition, in the U.S., the Federal Reserve has cut interest rates several times since October, when the survey was conducted. During its December meeting, the Fed brought its target rate down to a range of 4.25%-4.50%, a level it was at in December 2022.
Asset managers surveyed by Ocarian also did not anticipate a negative impact on their fundraising efforts. A majority (69%) expected their company’s current valuation cycle to have a positive effect on fundraising, while 7% expected a very positive effect. Another 32% expected the impact to be neutral.
The survey was conducted by independent research firm PureProfile and included 300 senior executives working at companies with a minimum annual revenue of $10 million. The companies included alternative asset management firms, wealth management firms, corporations and family offices. The respondents were located across Canada, France, Germany, Hong Kong, Ireland, Norway, Saudi Arabia, Singapore, South Africa, Spain, UAE, U.K., U.S. Bahrain, Denmark, Italy, Kuwait, Portugal and Switzerland.
