D1 Capital Partners, the $21bn hedge fund led by Daniel Sundheim, has staged a strong recovery by capitalising on undervalued European corporate turnarounds, marking a significant rebound from its heavy tech-driven losses in 2022, according to a report by the Financial Times.
The report cites an investor letter seen by the FT as revealing that D1 posted a 44% return on its public portfolio in 2024, fuelled by strategic investments in Siemens Energy, Rolls-Royce, and UniCredit. The momentum continued into 2025, with a 7.7% gain in January, according to unnamed sources familiar with the figures.
D1’s resurgence has allowed it to surpass its high-water mark for most investors, meaning it can once again collect performance fees — a key milestone after the fund was forced to forgo them until clients recovered their losses.
The New York-based firm was among several high-profile hedge funds, including Coatue Management and Tiger Global, that suffered in early 2022 after making big private-market bets on tech startups, only to see valuations plunge. Sundheim, a Viking Global Investors veteran, launched D1 in 2018 with a strategy inspired by Amazon’s “Day One” philosophy of continuous reinvention.
Rather than retreat, D1 Capital pivoted towards undervalued European companies undergoing transformation, where leadership changes and cost-cutting measures have created opportunities.
D1’s focus on European valuation discounts relative to US counterparts has played in its favour. “We believe there is currently an extremely attractive opportunity to buy great businesses that trade on non-US exchanges,” Sundheim wrote in the letter.
While European stocks have historically lagged the US, that trend has begun to shift. Since Donald Trump’s re-election, the Stoxx Europe 600 index has gained 5.7%, outperforming the S&P 500, which has declined 0.2% over the same period.
Despite the rebound, D1’s private investments have lagged, returning just 3.7% in 2024. A slowdown in deal activity and IPOs has left some assets illiquid, making it difficult for investors to exit.
Currently, D1’s portfolio consists of $8bn in public investments and $12bn in private holdings, with 2022’s losses concentrated primarily in the private segment. The firm has long invested in Silicon Valley giants such as SpaceX, Groq, Stripe, and Ramp, but has since diversified beyond tech.
One of its biggest bets remains SpaceX, which now accounts for nearly a third of its private portfolio. The valuation of Elon Musk’s aerospace company has surged to $350bn, and while there has been “very substantial inbound interest” in acquiring D1’s stake, the firm does not plan to sell, according to the letter.
While D1’s past short positions contributed to heavy losses during the meme-stock frenzy, the firm has not abandoned short-selling. Sundheim described short bets as a “core part of our business”, adding that they are poised to benefit from increasing market volatility.
He pointed to the rise of highly leveraged hedge funds that quickly unwind positions in downturns, arguing that this trend will amplify volatility and create opportunities for tactical shorting.
