Soros Fund Chief Investment Officer: Investors will be in "pain" for the next 18-24 months

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Facing the enormous uncertainty brought by the disruption of AI technology and geopolitical conflicts, Soros Fund has issued a warning: the market is falling into deep "exhaustion," and investors must prepare for a "painful period" that could last up to two years.

"In the next 18 to 24 months, investors will go through a 'painful' phase."

On March 3rd local time, at the Bloomberg Investment Conference held in New York, Dawn Fitzpatrick, Chief Investment Officer of Soros Fund Management, gave a pessimistic outlook on the global market for the next two years.

"Market participants are dealing with tremendous uncertainty," she mentioned, noting that the decline in stock prices of software companies deemed to be facing AI risks, as well as factors like Middle East conflicts, are exacerbating this uncertainty. "Beneath the surface, all these factors feel enormously exhausting."

Dawn Fitzpatrick, video screenshot

AI Disruption Transfers to Credit Side, Private Credit Sees a "Redemption Wave"

The impact of AI on software companies has not remained confined to the stock market. The chain reaction it has triggered has already spread to the private credit sector.

This is currently the most watched logic chain on Wall Street: AI may disrupt the business models of traditional software companies—which leads to their revenues declining—which in turn causes them to be unable to repay loans on time—ultimately triggering credit defaults.

Such default worries have directly triggered capital flight. Direct lending funds (i.e., Business Development Companies, or BDCs) are facing severe redemption pressure. Major asset management giants on Wall Street—including Blackstone Group, Ares Management, and Blue Owl—have recently faced a large number of withdrawal requests from individual investors.

Facing this hot topic, Fitzpatrick gave a clear prediction. She believes this elevated redemption trend will continue, "Some of these structures (fund products) will face pressure."

But as the industry comes under pressure, Fitzpatrick gave high marks to Blackstone Group’s coping strategy. Reportedly, Blackstone previously withstood pressure and met investor withdrawal requests as high as 7.9%.

"In the short term, this will damage their management fee income," Fitzpatrick said bluntly, "but in the long term, I believe it will greatly benefit their business development." In the tight liquidity private credit market, being able to readily meet redemption demands is undoubtedly an injection of confidence into institutional credibility.

When talking about Soros Fund’s own operations, Fitzpatrick revealed their strategy of "being greedy when others panic." She said that during the wave of sell-offs, some assets were wrongly dumped, and Soros Fund has already started buying some BDC stocks, provided that the companies' "underlying loan asset portfolios look attractive."

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