Berlin was the capital of private markets this week, with SuperReturn International gathering the industry over a full five days and the air was thick. Yes, more than 5,000 conference goers do a packed venue provide, and you will likely end up holding your plate for lunch. But you could also tell that the market, and sponsors in particular, are in a tight spot.

“Private equity is in a Catch-22, they’re dealing with falling valuations and at the same time with an increased need to return capital to their investors,” as one panelist put it.

“A lot of PEs are in panic mode. Smaller fund managers are struggling to fundraise, there’s people leaving, people getting laid off, now running around looking to start their own operations,” said a participant from a major asset management firm.

Obviously, sponsors face headwind from macro uncertainties, protectionism, tariffs, consumer restraint, inflation, and higher interest rates. But many of the problems for private equity today resulted from a “collective delusion of high valuations” and GPs having “misunderstood low-cost funding and its impact” on the value of their portfolio companies, said one of the top private markets people at the event.

And that is a problem for private credit, too. In Germany, you’d say: “Mitgehangen, mitgefangen”, which basically means that, if you’re on the other side of the coin, and this coin is dropping, you’re going with it. “If private equity is in trouble, it’s bad for us,” said a senior direct lending executive to 9fin.