D1 Capital Partners’s massive exposure to private bets is weighing on returns, making it one of the year’s worst-performing crossover funds.
(Bloomberg) — D1 Capital Partners’s massive exposure to private bets is weighing on returns, making it one of the year’s worst-performing crossover funds.
Dan Sundheim’s firm — which has 60% of its roughly $20 billion of assets invested in venture capital and private equity — gained just 3.8% this year through August after barely making money last month, according to people familiar with the matter. Those results are for a share class with as much as 35% invested in private assets.
D1 marked down its private wagers, eating into returns from its stock book, which gained 14%, the people said.
A spokesperson for the New York-based firm declined to comment.
Crossover funds make both stock and VC bets, and of the group, D1 has made one of the most aggressive pushes into the latter.
D1 lets its investors choose from share classes with various exposures to privates, including 35% and 50%. The firm has marked down many private positions as sectors such as tech and real estate struggled with rising interest rates.
Read More: D1 Hedge Fund Marks Down Privates, Gains 1.9% in First Quarter
The firm has invested in at least 167 private companies, according to data provider PitchBook. Its biggest illiquid wagers include stakes in Lineage Logistics, Space Exploration Technologies and Collectors Universe.
D1’s returns this year pale in comparison to some peers that have far less exposure to privates.
The hedge funds at Tiger Global Management and Coatue Management gained 20% and 16% respectively through August, while Lone Pine Capital’s rose 12% through July. Viking Global Investors’ hedge fund, which barely holds any private assets, climbed almost 11% so far this year, another person said.
Third Point, however, is down 1.6% through the first eight months of 2023.
Read More: Schonfeld, Balyasny, ExodusPoint Lag as Multi-Strats Falter
Crossover funds are aiming for a comeback after disappointing investors in 2022 with losses spanning from 18% to as much as 56%.
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