We’ve certainly had some market turmoil recently. But things could get worse, according to Mark Patterson, chairman of MattlinPatterson, a private equity fund that specializes in investing in distressed companies.

Financial conditions are “probably more challenging than at any time since 1929,” Patterson said, speaking at Dow Jones’ Private Equity Analyst Conference on Monday.

“We’re not in normal times. If you don’t accept that there is at least a 20 to 25 percent chance of a financial markets led depression you’re fooling yourself.”

Patterson also said he believes 300 to 500 U.S. banks are set to fail.

As for distressed investing, Patterson said that despite pullbacks in the market, very few industries are significantly undervalued.

“In the industry of catching falling knives there are lots of bleeding hands today. Some of the smartest people you could name … have been piling in to what appear to be significant diminution of value in industries and finding they are in 20 to 80 percent too early.”

“Perhaps our single best asset in the portfolio today is patience,” he said.