New data shows that the U.S. economy contracted at a 0.3% annual rate in Q1 2025, making a recession appear imminent. How should fund managers and syndicators prepare?
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Learn how to launch your own private fund or real estate syndication with Fund Playbook. In each episode, Jimmy Atkinson shares insights on syndicating deals, raising capital, and entrepreneurship.
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Episode Transcript Summary
Jimmy Atkinson and Andy Hagans open the episode by examining newly released economic data indicating a potential U.S. recession. Q1 2025 GDP figures show a contraction of 0.3%, down sharply from 2.4% growth in Q4 2024. With persistent tariffs and looming trade disruptions, economic headwinds appear to be intensifying.
Economists and financial leaders are sounding alarms:
- JPMorgan estimates a 65% chance of recession in 2025.
- David Rosenberg pegs the odds at 85%.
- Torsten Slok of Apollo Global says it’s nearly certain at 90%, calling it a “voluntary trade reset recession.”
- Ray Dalio warns of “something worse than a recession.”
- Jamie Dimon, CEO of JPMorgan Chase, recently remarked that a recession may actually be the best-case scenario under the current trade policy.
While a formal recession isn’t declared until two consecutive quarters of negative GDP, the stage appears to be set. With the Q1 contraction now confirmed, all eyes are on the Q2 data.
Understanding the “Voluntary Trade Reset Recession”
The episode dives into the concept of a “voluntary recession,” tied to President Trump’s reimplementation of protectionist tariffs and reshoring efforts. The hosts discuss a recent economic report from Apollo forecasting a cascade of effects from these trade measures:
- U.S. ports slowing down due to delayed imports
- Trucking and rail transit declining
- Retail shelf shortages and layoffs in logistics and retail
- Broad economic contraction by summer 2025
Jimmy and Andy explore the long-term intent of these policies—reviving domestic manufacturing and strategic industries—but note that the short-term impacts are real, and they could be painful. Jimmy adds that while onshoring is a laudable goal, it’s a process that requires years, not months.
Private Equity in the Last Recession
Jimmy references a 2010 article showing that private equity fundraising plunged 68% in 2009 during the Great Recession. The lesson: recessions can be brutal for capital raising. But Andy sees opportunity in the adversity, suggesting that downturns can create better vintages for funds due to:
- Lower valuations
- Less competition
- Higher-quality deal flow
Both agree that while fundraising gets harder, returns often improve for those who can navigate the cycle strategically.
Advice for Fund Managers and Syndicators
Jimmy and Andy provide tactical and strategic guidance for those raising capital during a recession:
1. Acknowledge the Reality
Raising capital will be more difficult. Expect slower timelines and greater investor hesitancy.
2. Lean Into Downside Protection
Emphasize stability and non-correlation to public markets. If your fund or asset class has historically shown lower volatility (e.g. certain types of real estate), highlight that.
3. Position the Strategy as Opportunistic
Rebrand your thesis around distressed acquisitions, contrarian investing, or capitalizing on dislocation. Investors with dry powder are looking for value plays.
4. Target Recession-Resilient Sectors
Examples include:
- Multifamily housing
- Self-storage
- Healthcare real estate
- Government-leased properties
Avoid sectors that may face greater consumer pullback, though Andy defends retail in certain geographies.
5. Go Smaller, Stay Nimble
Rather than trying to raise $100 million for a single big project, consider smaller fund raises with flexible minimums and broader ranges of outcomes.
6. Build a Long-Term Brand Story
Funds that perform well in down markets often establish lasting reputations. Don’t underestimate the long-term branding benefit of investing during turmoil.
7. Be Patient
Expect longer fundraising timelines. The typical LP psychology shifts toward fear during recessions, especially as their portfolios suffer drawdowns.
Reframing the LP Conversation
Andy suggests that even though investors say they want alternatives for downside protection, many become gun-shy during downturns. It’s up to fund managers to:
- Meet investors where they are emotionally
- Emphasize illiquidity as a feature (not a bug)
- Remind them that “everything is on sale” during periods of distress
Jimmy echoes the point that contrarian investors thrive in these moments. Those with dry powder—especially family offices—may be waiting for the right moment, and that moment may be coming soon.
Fund Structuring Strategy
Andy recommends that fund managers avoid “all-or-nothing” capital raise structures. Instead:
- Offer more flexible fund sizes
- Accept capital incrementally
- Build momentum from smaller wins
This helps mitigate the reputational and financial risks of failing to close a raise.
Risks for Emerging Managers
Jimmy shares concerns that newer fund managers face real risks if they can’t close a raise:
- Capital may need to be returned at a loss
- Reputations may be permanently damaged
- Team morale and investor confidence may erode
To de-risk:
- Start with soft commitments or friends/family rounds
- Don’t launch before gauging serious investor interest
- Build a team with experienced legal and financial advisors
Expected Returns in PE and Real Estate
Jimmy and Andy also tackle a frequently asked question: What kind of returns should investors expect?
- Core/Core+ Real Estate: 8–12% IRR, with moderate cash flow
- Development/Opportunistic Deals: 15–20%+ IRR, with higher risk and illiquidity
- Ground-up OZ Projects: Often target 2–3x equity multiples over 10 years, with minimal early cash flow
Jimmy reminds listeners that any illiquid fund should at least offer a meaningful premium over the risk-free rate and the S&P 500’s historical returns.