In a PERE Credit article, asset management partners Matt Posthuma and Eric Requenez commented on the impact of interest rates on return of capital and deployment opportunities.
Higher interest rates have dampened transaction activity, causing fund managers to hesitate on deployment. Matt noted that “funds which have raised capital and have dry powder to deploy are often not doing so because the higher cost of debt means that often deals will not pencil at a level that will allow managers to achieve their returns.”
On the topic of outlook and expectations, Eric explained that “given where valuations and rates are, managers are forced to be more focused on how assets are projected to perform as opposed to being able to take a little bit more risk on given the volatility in the market.”
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