Will a rate cut(s) save distressed investments?
Will a rate cut(s) save distressed investments?
Cuts are approaching, but will they actually help?
Last premium post: LP Investing Lessons Podcast #6
Last free post: LP Investing Digest #42 & Full Article Index By Topic
Announcements:
LP Topics Seminar: an ongoing biweekly 1 hour meeting with other LPs where we'll go over investment decks, capital call and distressed situations, and modeling. This is meant to provide a deeper look into existing LP investments. Please reply to this email if you’re interested.
LP Cohort: I have space in the September cohort. Please reply to this email if it’s of interest. Review 4 deals with me (4 consecutive weeks) and other LPs to learn what to look out for in deals. I recommend doing this before the LP Topics Seminar.
Will a rate cut(s) save distressed investments?
Happy Thursday! 👋
All major headlines seem to be pointing to an upcoming rate cut, which begs the question - will it really help existing investments in distress? My goal today is answer this.
For some background, here’s the front page of the WSJ yesterday:
You can also see below that, from a betting market perspective, investors seem to be pricing in a cut with 95% probability.
While everyone seems to agree that it’ll happen and the argument is around how much (25 vs 50 bps, i.e. 0.25% vs 0.50%), does the change cause the relief many LPs need?