The $21bn fund manager D1 Capital Partners has made a comeback by riding a handful of giant corporate turnarounds in Europe, as the region’s stock markets have undervalued many of its largest companies.
The firm netted a 44 per cent return on its publicly traded portfolio last year, with the biggest drivers coming from its investments in German group Siemens Energy, British industrial company Rolls-Royce and Italian bank UniCredit, according to an investor letter seen by the Financial Times.
D1 Capital continued those gains into 2025, with a 7.7 per cent net return in January, according to a person familiar with the figures.
The returns have helped D1 Capital recover from big losses on its heavy tech bets in 2022, bringing the hedge fund past its high-water mark for the “overwhelming majority” of its investors, meaning it can again collect performance fees that it had to forgo until clients were whole again.
New York-based D1 is among a group of prominent hedge funds such as Coatue Management and Tiger Global Management that built large private stakes in technology companies alongside their publicly traded long-short portfolios. They were hit hard at the beginning in 2022 as the valuations of technology companies plunged. It is led by Daniel Sundheim, a veteran of Viking Global Investors who named his firm in an homage to the Amazon ethos that every day is “day one”.
D1 Capital has made money, largely in Europe, by betting on high-profile corporate turnarounds that have begun to materialise. Sundheim highlighted the new leadership at Rolls-Royce, where chief executive Tufan Erginbilgiç is embarking on a cost-cutting drive, and UniCredit, where Andrea Orcel is scouring Europe for possible takeovers.
Sundheim, who founded D1 in 2018, is ushering the firm through an inflection point. After suffering from the steep losses in 2022, the fund has made several new hires to its investment team over the past few months, according to the letter.
In part, the bets have benefited from the discount European corporate groups trade at relative to their US peers.
“We believe there is currently an extremely attractive opportunity to buy great businesses that trade on non-US exchanges . . . Companies with similar products, end markets, and growth prospects, can trade at vastly different valuations,” he said referring to lower European earnings multiples.
Yet since Donald Trump landed in the White House, that trend has begun to reverse: the benchmark Stoxx Europe 600 index has gained 5.7 per cent compared with Wall Street’s S&P 500, which has given back gains and is down 0.2 per cent in the period.
However, D1 did not reap big profits everywhere. The fund only notched a 3.7 per cent net return last year among its private holdings, the letter added. As the rate of new deals and public listings remain subdued, investors have struggled to cash out of their positions because some assets remain stuck.
The fund is made up of about $8bn in publicly traded holdings and $12bn of private investments, said a person familiar with its portfolio. D1 Capital’s losses during 2022 were primarily concentrated in its private investments.
The fund launched in 2018 with a proclivity for making big bets on promising tech companies, but has in subsequent years diversified into other sectors. It has since built stakes in Silicon Valley darlings such as SpaceX, Groq, Stripe and Ramp.
D1 Capital’s stake in Elon Musk’s aerospace company SpaceX — which has surged in valuation since Trump was elected in November — makes up nearly a third of its private portfolio. While Musk’s company has since leapt in valuation to $350bn, D1 Capital does not plan on selling its stake “despite very substantial inbound interest”, the letter said.
Sundheim’s fund was hit hard by the meme-stock short squeeze, prompting the firm to reconsider its short bets, the FT reported at the time. However, the fund still maintains short positions today, and called them a “core part of our business”.
He predicted those bets would be bolstered by rising volatility in stocks as large hedge funds that use heavy leverage and are quick to sell during downturns own an increasing share of US markets.