Soros’s Money Manager Warns Recession Is Inevitable, Says Crypto Is Mainstream

Dawn Fitzpatrick says crypto is now mainstream and warns that climate impact is going to become increasingly in focus and in that context, Ethereum is likely to gain some more traction over Bitcoin

Chief Investment Manager Dawn Fitzpatrick.
By Claire Ballentine
May 31, 2022 | 09:14 AM

Bloomberg — Despite the massive selloff in equities this year and persistently high inflation, Dawn Fitzpatrick isn’t worried about a recession in the immediate future.

The chief executive and chief investment officer of Soros Fund Management argues the US consumer is in “extraordinarily” good shape, which will help the economy weather the Federal Reserve’s expected rate hikes. And while wage growth isn’t keeping up with inflation, Americans are still flush with enough cash to pay down their credit card balances.

“Rate increases will slow the economy and will impact inflation, but this economy has some shock absorbers built in,” Fitzpatrick, 52, said in an episode of “Bloomberg Wealth with David Rubenstein.”


As head of George Soros’s family office, which started life as a hedge fund in 1970, Fitzpatrick oversees about $28 billion. Most of that money is part of the 91-year-old billionaire’s Open Society Foundations, which fund causes including human rights, justice and progressive politics.

The beauty of the family office, Fitzpatrick said, is that she can stay nimble and scale up her bets when necessary, whether that’s $100 million or $500 million, sometimes making decisions on fleeting opportunities in a matter of hours.

“We can do things faster and in a bigger size than almost any other investor,’’ she said in the interview taped April 29.  “There’s pools of capital that are massively larger than us, but they tend to have a process that could take weeks or months.”

What’s more, the breadth of the firm’s operations means Fitzpatrick can seize upon opportunities across the globe. “Because we can invest across any asset class in almost any geography, we can really connect the dots and operate in the spaces in between where the typical asset management industry can go.”


Prior to joining Soros, Fitzpatrick spent about 25 years at UBS Asset Management, including as head of investments. She enjoyed it, but faced more regulatory constraints as part of the publicly traded bank, she told Rubenstein, co-founder of investment firm Carlyle Group Inc.

Fitzpatrick started her career at options trading firm O’Connor & Associates, which became part of UBS. She made her name there during the collapse of Long-Term Capital Management in the late 1990s, when she made “a lot of money” trading convertible bonds. It was there that the bank tried to convert her — the only female trader in the unit — into a salesperson until a trusted adviser warned her against it.

“You are a natural investor — and you’re not that charming,’’ she recalled them saying.

Fitzpatrick grew up in Irvington, New York, a small town about 20 miles north of New York City on the Hudson River. She went to the University of Pennsylvania’s Wharton School where she ran track “kind of like Forrest Gump,” she said. “I wasn’t fast, but I could run a really long way.”

She continues to run almost every day and has three teenagers who also want to be investors.

Fitzpatrick spoke with Rubenstein about the role of family offices in investing, her outlook on crypto and SPACs, and why the industry needs more diversity.


The interview has been edited and condensed.

The US economy shrank in the first quarter of 2022. Do you think this means we’re likely to go into a recession?

When you look at that GDP number, the really important point is the reason it shrank is because of net imports, which were negative, which means we’re importing a lot of goods from abroad. That’s because consumer and corporate demand is robust. So there’s a silver lining in the reading of that GDP number. The bottom line is a recession is inevitable. It’s a matter of when. And when you look at what markets are pricing here, they’re pricing it fairly soon.

In the 2023 context, depending on which asset classes you’re looking at, I actually think markets might be wrong. The reason is that the consumer right here is in extraordinarily good shape.


We were talking with a big consumer bank in the US and of the accounts they had coming into the pandemic that had $1,000 to $2,000, today the average amount in those same accounts is $7,400. The cohort that was $2,000 to $5,000, today has $15,000 in their account.


For credit card companies, delinquencies are way below pre-pandemic levels. People are paying down their credit cards at levels that were way, way faster than pre-pandemic. Wage increases are not keeping up with inflation, but I do think consumers are in good shape.

We have higher inflation than we’ve had in decades. Is that not a big problem?

There’s no doubt interest rates are going to go higher, and the Fed is going to move very quickly. That said, interest rates net of inflation are still negative. So monetary policy is still really easy. Rate increases will slow the economy and will impact inflation, but this economy has some shock absorbers built in. I don’t think we’ll avoid a recession, but it will be further out than people expect.


Do you think the Federal Reserve missed the boat on inflation and should’ve moved more quickly earlier on?

In hindsight, they should’ve moved earlier, and they’re doing their best to catch up now. You’re going to see them move really aggressively. Fifty basis points at the next three meetings is already priced in. I think you’re going to see them rush to get rates up to the 2%, 2.5% range and then they’re going to reassess where the economy is. It’s a hard job. They were obviously worried about inflation, but they were also trying to support a population coming through a pandemic.

Explain to us how important family offices have become in the investment world.


Quietly, they’re really large in terms of the quantum of capital that’s controlled by family offices. They play a really important role in markets and investing, because they tend to be more nimble. They can act quickly, and they can act in big size. In a backdrop where investment banks have less proprietary capital, the role family offices play is increasingly important. They’re a large pool of capital.

If you have a really big decision, an opportunity to make a multi-billion-dollar investment, do you have a board that you have to go to, or George Soros?

That’s one of the great things about this job and this platform is we can make a decision like that in a matter of hours. There’s no big hierarchy to make that decision. Myself and my head of my European office are a standing investment committee, and then we bring in subject matter experts. We can do things faster and in a bigger size than almost any other investor, and there’s pools of capital that are massively larger than us, but they tend to have a process that could take weeks or months.


Soros is very famous for, among other things, saying, “If you get a really good idea, pursue it to the extreme.” In other words, put a lot of money into something. Does he influence you in that way?

When I came here five years ago, George had not been involved day to day for a while. And interestingly, the portfolio I inherited was over-diversified. When you have an over-diversified portfolio, you’re guaranteed mediocrity.

Over the past five years, we’ve really tried to streamline the portfolio and one of the things we spent a lot of time on is making sure our best ideas are right-sized. One of the interesting things, though, in the investment world is a lot of times with the best ideas, there’s a limit to how much you can actually buy, right? The capacity is not infinite. So usually, the constraining factor is the sheer amount available.


What is your own view on crypto?

It’s here to stay and it’s gone mainstream with Fidelity just announcing you can put it in your 401(k). The one caveat I would say is first of all, climate impact is going to become increasingly in focus and in that context, Ethereum (XET) is likely to gain some more traction over Bitcoin (BTC).

When we look at companies in the blockchain and crypto space, they all have massive treasury accounts with a lot of coins in them. And to me, that creates a little bit of near-term vulnerability. But that said, I think blockchain technology is going to have some great applications.

What about SPACs?

Less of a fan of SPACs. I just think they’re really misaligned with the end buyer. [Securities and Exchange Commission] Chairman Gary Gensler is taking a hard look at them and kind of pushing through reforms is important. It’s overdue and it’s the right thing to do.

You’re the first female head of Soros Fund Management and I assume the first woman at many things you’ve done in the investment world. Is it a challenge today as much as was when you first started?

In my career, I’ve never really thought it’s either an advantage or a disadvantage. There have been points in time when it’s been one or the other, but in aggregate it’s been fine. But I’d say the investment industry overall has really not done a good job having women in senior roles, especially on first-order investment roles.

A Morningstar study basically said across the public asset management industry, women are in 10% of portfolio management roles. When you look at hedge funds, which is the public markets and the most lucrative jobs, women are only 2% in senior investment roles and if you further break that out by assets managed, it goes down to 1%. When you look across all industries, that is one of the most abysmal performances.

Obviously, this is something I’m pretty passionate about changing. When you look at entry-level jobs in the industry, women come in at over 50%. I know there’s a lot of focus both on that hiring and then at the board level, but I actually think the problem is in the middle. It’s helping women get over that first, second and third level of promotions.

What do you think is the most common mistake that investors make?

FOMO [fear of missing out]. So buy high, sell low. The amount of damage that does to the average investor is big.

What’s the best investment advice anybody’s ever given you?

You don’t need to have a good idea every day. There are times to be patient and there’s time to press.