The Dangers of Hedge Fund Investments in Private Companies

While private investments have driven big gains for some hedge funds, these investments could prove to be a double-edged sword in a liquidity event.

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Illustration by the Project Twins

Forget about traditional longs and shorts: A growing number of hedge fund firms are racking up their biggest gains from private investments, many of them in start-ups or pre-IPO technology and Internet companies based in India and China.

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