D1 Capital Partners, the $24.5bn hedge fund firm founded by Dan Sundheim, is looking to raise more than $1bn for its first dedicated private equity fund, underscoring the growing pivot among hedge funds toward longer-duration, illiquid investments, according to a report by Bloomberg.

The new vehicle will mark D1’s first traditional PE-style structure, complete with a hard close and committed capital – departing from its usual hedge fund format that blends public equity exposure with private investments through side pockets. The move positions D1 alongside other crossover managers such as Tiger Global, Coatue, and Viking Global Investors, which have increasingly blurred the line between hedge fund and private equity strategies.

Private investments already make up about 60% of D1’s assets, according to people familiar with the firm’s portfolio. The New York-based manager has backed companies including SpaceX, Collectors Holdings, Lineage Inc, and fintech firm Ramp, and previously held a stake in Instacart prior to its IPO.

Sundheim, formerly CIO at Viking, launched D1 in 2018 with a flexible mandate allowing investors to choose varying levels of illiquid exposure. That model proved prescient—though volatile. The hedge fund tumbled 30.5% in 2022, hurt by tech-heavy private valuations, before rebounding strongly with a 24% gain year-to-date through September.

D1’s planned private equity vehicle reflects a broader recalibration across the hedge fund industry, as managers seek to lock in capital and diversify revenue streams amid tougher fundraising and more correlated public markets. For investors, it offers exposure to Sundheim’s high-conviction growth bets in a structure better suited to capturing value over longer timeframes.