The art of adaptation: portfolio restructuring trends and strategies

2023 has been marked by significant changes and challenges, leading to widespread restructuring. But what exactly does “restructuring” entail?

Restructuring is a corporate action that involves significantly modifying a company’s debt, operations, or structure to limit financial harm and improve the business. In the financial services sector, restructuring is a technique used to help an investment portfolio reach its full potential.

While restructuring is often considered reactionary, it can be a proactive approach that involves optimising investment strategies to improve returns, reduce risks, and increase efficiency. Investors may choose to restructure for a broad range of reasons, including market shifts, new investment goals, or the need to rebalance.

In this post, we’ll discuss the most common drivers of restructuring, current restructuring trends, and strategies for effectively positioning your efforts.

Reasons for restructuring

Restructuring is not merely a means to mitigate challenges; it’s also a proactive step towards growth and stability. A company or investor can restructure on their own initiative to add value and ensure they are well-placed to take advantage of future conditions.

Here are some of the primary reasons why firms opt to restructure their investments or debts:

• Maturity: As investments reach their maturity, it becomes essential to reassess their viability and reallocate resources to maximise returns and sustain long-term growth.
• Efficiency: Streamlining operations is another core driver of restructuring action, intended to reduce costs, enhance productivity, and ultimately increase profitability.
• Market conditions: High interest rates, soaring inflation, supply chain disruptions, and geopolitical instability have forced many investors to reevaluate and adjust their strategies to adapt to a changing market.
• Internal pressure: Restructuring can help to manage risk and improve returns during periods of instability. Investors can restructure to achieve better diversification, rebalance portfolios to align with changing goals, and reduce concentration risk.
• Preparation: Restructuring the firm or its investment portfolio can make it more attractive to potential partners or buyers, smoothing the path for a merger or sale.

Current restructuring trends

Restructuring can be approached in many different ways. The ideal strategy depends on your circumstances and may include all of the below, a combination of a few, or just one of the actions explored here.

As we move into 2024, here are the most common restructuring trends we’re seeing in the market:

• Creating and merging different vehicles: Consolidating various entities or investments to create a stronger, more cohesive portfolio.
• Runoff: Selling underperforming assets and reinvesting in more lucrative opportunities.
• Risk mitigation: Hedging against risk through investments. For example, an insurance company might restructure to manage risk by investing in catastrophe bonds.
• Equity restructuring: Altering the equity structure of a company to stabilise finances and attract new investment.
• Restructuring operations: Downsizing or outsourcing certain administrative functions
• Liquidation: Liquidating certain assets can also be a good way to preserve value and focus on core, profitable areas.

How IQ-EQ can help

Though it’s often seen as a reaction to adverse market conditions, restructuring is also an opportunity for renewal and growth. By understanding the current trends and the strategy behind restructuring, investors can turn challenges into future success.

Having a reliable partner to guide you through your restructuring strategy is invaluable. IQ-EQ has over 30 years of experience with liquidation and runoff service, providing tailored solutions to suit your needs. Our liquidation services include shareholders’ or creditors’ voluntary winding up, winding up of limited life companies, and removal from register. Whether you’re considering a strategic divestment or need to manage a lift-out, our expert team can guide you toward the most advantageous outcomes.

Get in touch today.