Hedge funds investing in PE/VC?
There seems to be a lot of HFs that are straying from the public markets to invest in private companies. A bit strange given the massive illiquidity here compared to a L/S or quant driven strategy.
Curious which HFs are very active when it comes to PE?
Yeah, this has been going on for a while now. If you read Term Sheet on a daily basis you’ll be shocked at just how many funding rounds are led by hedge funds like Tiger Global, Coatue, etc. I have a friend at a HF with a growth equity arm and the way they think about it is that (as arrogant as I think it sounds) they believe they are significantly better/more thorough at diligence than VCs, and think they can select higher-quality companies than the VCs. I don’t know how much truth there actually is to it, but when you hear stories about VCs just throwing money at companies without doing any diligence (Theranos?) it’s not that far-fetched.
I’d love to see a returns comparison of VC firms vs. hedge funds that invest in similar stage private companies.
A lot of the times these are funds separate from their L/S strats (so different $ pools), or there's a sleeve carved out specifically to invest in illiquid assets and LPs know that going in. Part of the selling point these funds sometimes claim is they're longer holders after IPO and understand public markets, etc.
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