Hedge fund lock up period

Hi all,

I'm no expert at all, but it seems as though one important reason why hedge funds have underperformed in comparison to private equity funds is because the latter have capital lock up periods during which an investor cannot withdraw their investment without facing a penalty charge. By contrast, it seems is the hedge funds do not have such a clause and rather, investors can withdraw from hedge funds as they wish.

I realise that private equity funds have this requirement since their investments are far more liquid than those of hedge funds, but why don't hedge funds also lock up investor capital? This could allow them to invest in longer term opportunities and ultimately boost their returns.

 

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