Why Smart Money Abandon Private Equity For Hedge Funds

fter more than 15 years of private equity dominance, institutional investors are making a dramatic shift. University endowments, pension funds, family offices, and sovereign wealth funds are reducing their private equity allocations and moving capital back into hedge funds.

This represents a complete reversal of the trend that defined institutional investing since the financial crisis, when private equity became the default choice for sophisticated investors seeking higher returns than public markets offered.

The timing isn’t coincidental, as Private Equity’s core mechanics have stopped working as interest rates rose and exit markets froze. Meanwhile, hedge funds have quietly delivered strong performance, improved their operations, and demonstrated the value of liquidity in uncertain markets.