Patient Capital is Losing Its Patience
Sovereign Wealth Funds and the Growing Scrutiny on Private Markets
The Clock is Ticking
The Kuwait Investment Authority’s Sheikh Saoud Salem Al-Sabah recently delivered a warning to private equity fund managers at the Qatar Economic Forum. His concern? A perfect storm brewing across large buyout and venture capital funds that raised significant capital during their peak years—2012-2017 for private equity and 2018-2022 for venture capital.
His argument was direct. Poor underwriting, an overreliance on cheap debt, and an unclear exit strategy are putting pressure on value creation. Using a $20 billion fund example, he asked:
"If your base case is a 2X return, that means you need to realize $40 billion in assets. Question is—who’s going to buy them? The answer is 'I don’t know.' Put them all together, and you have the perfect storm."
The concern is growing. As vintages mature and investors expect multiples on their capital, a lack of viable exit options could spell trouble for funds that overestimated market liquidity.
A Primer on SWFs in Private Markets
Over 40 years ago, select managers at Sovereign Wealth Funds diversified out of public markets and into private equity and alternatives, shifting their portfolios toward long-term, illiquid assets. Over time, two things became clear—SWFs assets kept growing, and the largest ones rarely faced liquidity calls. Today, over half of all SWFs invest in private equity, making them central players across large buyouts and anchors of Venture Capital Funds.
Source: Cumming D, Monteiro P. Sovereign wealth fund investment in venture capital, private equity, and real asset funds. Journal of International Business Policy. 2023 May 16:1–26
Data on SWF commitments remains opaque, but research highlights a significant rise in private equity deal activity between 2012 and 2017. Many of these funds now face maturity without a clear exit strategy. Adding to the challenge, volatility in public markets since the start of 2025 suggests that private market liquidation events will likely struggle against downward valuation pressures.
The Venture Capital Dilemma
SWF investments into venture capital are a more recent phenomenon, driven by two key ideas; 1) The historical outperformance of technology giants in public markets, and 2) The need to incubate domestic VC ecosystems, anchoring local funds to drive innovation
The former, however, has been hit-or-miss. Softbank’s Vision Fund was marred by the spectacular collapse of WeWork. Today, Temasek announced a reduction in VC commitments going forward. Their lessons were learned after the write-downs of FTX and eFishery, wiping out over $500 million from their portfolio.
Incubating domestic VC ecosystems is less pressured. Strategic Development Funds, unlike other SWF allocations, can take on outsized risk to fuel startup ecosystems, anchoring local venture funds with patient capital. These VC funds, now in their third or fourth vintages, are being assessed on performance. The results are becoming clearer and winners will be separated from the losers.
Source: International Forum of Sovereign Wealth Funds
Funds raised during the COVID-era tech boom (2018-2022) are now approaching maturity. These vintages, which rode the valuation surge, will soon need liquidity events to justify their multiples. Venture funds seeking fresh SWF capital will have to prove strong DPI from earlier funds. For newer funds, a clear value creation thesis is no longer optional—it is necessary.
Patient Deployment
Sovereign wealth funds were once known for their patient capital, but in private markets, their patience may be waning. SWFs may characterize patience in a different form; deployment. They may watch and wait for the next few years to determine whether their existing portfolios deliver, or if a reckoning awaits for funds that failed to build a viable path to exits.