The fate of investors hangs in the balance as Warburg Pincus boss warns of the critical need for margin focus in a time of soaring rates.

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Private equity executive Chip Kaye believes that investors need to pay attention to a company’s ability to maintain margins in the current financial environment created by higher interest rates, rather than just its growth prospects. Kaye, CEO of Warburg Pincus, stated that this moment is fundamentally different from anything the market has experienced in the past 40 years, with increasing inflation, rising interest rates and great power politics further complicating things. He advises investors to lean into businesses that have the ability to adapt to a higher inflation environment. When assessing a potential investment, Warburg considers how easy it is for customers to switch alternatives and the contribution the investment would make to the customer’s end-product. In contrast, Kaye is sceptical about technology ventures that rely on subsidising their services with investor cash. He recommends that investors avoid lossmaking businesses that cannot survive in a higher-inflation environment. Overall, Warburg seeks to create value for its investors through efficiency, cost management and ultimately stable growth.

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