Eswatini Financial Times

These pension funds and endowments have been forced to sell what they can, even outperform­ing liquid hedge funds to fund their capital calls.

out in profit, MSCI data shows. While fullyear data is not available yet, this looks likely to be the second year running investors have paid more than they received.

Profits from private equity are paid out when merger and acquisitio­n (M&A) deals go well or when a company matures enough to go public.

But private equity firms have struggled to exit their investment­s as deal making dried up. Worldwide M&A deal volumes declined during the first eleven months of 2023, to the lowest amount seen in that time period in a decade, LSEG data shows.

Initial public offering (IPO) volumes have also fallen to a 7-year low in the year to Wednesday, according to LSEG data, and distribute­d profits have shrunk.

Columbia’s Weinberg noted that investors had piled into private equity on an assumption of low rates, higher valuations and an exit deal.

“Today, rates have risen, IPO markets are dark and M&A is diminished. These investors’ models expected a flow of money, in the form of profit distributi­ons, to return. But those monies have just not come in,” he said.

Outflows mean tougher times for hedge funds and carry an opportunit­y cost for public pensions and university funding, with institutio­ns needing investment­s that are paying today.

Just keeping the more costly, said member.

“There are lights on has become one university board

people

redeeming

from systematic and quantitati­ve hedge funds that probably shouldn’t and maybe don’t want to, but they also don’t want to sell their less liquid investment­s at fire sale prices,” said

Datta.

“The challenge is, if you expect continued volatility, you may lose potential upside by taking chips off the table.”