Soros CIO Warns of PE 'Culling'
Soros Fund CIO Dawn Fitzpatrick is predicting a “massive culling” in private equity and private credit over the next 18-24 months. She warned that over-allocation into illiquid assets has created a precarious situation, signaling significant headwinds for the sector.
The fundraising landscape for private capital has become increasingly challenging, with a significant consolidation of capital towards the largest and most established General Partners (GPs). In 2024, the top 100 largest funds captured 50.6% of all committed capital, a stark contrast to 33.9% in the market-high year of 2021. This trend has squeezed small and mid-sized funds and led to a 10-year low in the number of first-time funds closing in 2024. This fundraising slowdown is directly linked to a decline in distributions to Limited Partners (LPs), such as pension funds and endowments. A sluggish M&A environment has meant fewer exits for private equity-backed companies, extending holding periods and trapping capital. As a result, many institutional investors are now overallocated to illiquid assets, straining their ability to make new commitments. In response to these liquidity constraints, the private equity industry has seen a surge in creative solutions like continuation funds and GP-led secondary transactions. The aggregate capital raised by continuation funds in 2024 nearly matched the 2021 record, hitting $37.9 billion. These transactions allow GPs to provide liquidity to LPs without a traditional sale of the underlying asset. While private equity faces headwinds, the private credit market continues its rapid expansion, with global assets under management projected to reach $3 trillion by 2028. This growth is fueled by banks stepping back from riskier lending due to tighter regulations, creating a void that private lenders are filling. Private credit has become a central part of private equity dealmaking, funding around 80% of global leveraged buyouts in 2024 and 2025. Despite the growth in private credit, there are emerging signs of risk. Some market participants have pointed to loosening credit standards and a lack of transparency as potential concerns. While defaults in private credit are increasing, they are not yet at critical levels; JPMorgan reported a default rate of 2.4% for the first quarter of 2025.
