Hedge funds are trying on new stripes as the industry’s traditional investing style loses its luster.

Dan Sundheim likes private equity. Tom Wagner seeks a drawdown fund. Steve Cohen eyes venture capital.

“Hedge funds are increasing their breadth of offerings, such as adding venture funds, private credit and illiquid strategies with longer lockups,” said Joseph Gasparro, who helps hedge funds build capital as head of Americas capital services content at Credit Suisse Group AG. “By employing new offerings, firms diversify their product base and increase the stability of their assets.”

Even successful managers see the urgency to evolve in the face of market pressures from quants, indexers and President Trump. While the industry suffered outflows and dismal performance through the first 11 months of 2018, managers are following big investors into the booming world of private capital.

Hedge funds are partly responding to the demands of investors. They are “challenging” managers about products that best fit their needs and pushing for customization and diversification, according to a 2018 global survey by consulting firm EY.

Sundheim: Private Equity

Sundheim led one of the biggest hedge fund launches of 2018 on the strength of his record as the former investment chief at Viking Global Investors. He also put as much as 35 percent of capital from investors in private companies, with the balance of the hybrid fund in publicly traded stocks.

D1 Capital Partners, which manages $5.1 billion, tapped the growing interest for private investments. Private equity had another strong year in 2018, bringing in about $415 billion in fundraising through Dec. 21, according to data compiled by Bloomberg.

The hedge fund, which started trading in July, made its biggest private investment so far in electronic cigarette startup Juul Labs Inc., according to a person familiar with the matter. Juul in December sold 35 percent of itself to Altria Group Inc. and decided to use a portion of that cash injection to pay dividends to shareholders, including D1 Capital, the person said.

Sundheim’s hybrid fund was flat through November. It fell as much as 8.4 percent in October as the stock market plunged. The company declined to comment.

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