A Swan Song? Hedge funds that were savvy enough to establish side pockets to target PE may still be engaged in the asset class, though some speculate the shakeout will force many to hone their strategies.(Feature)(private equity)

Byline: Danielle Fugazy

No asset class is exempt from the blood bath that took place on Wall Street in the second half of last year, and the redemptions being experienced by the population of hedge funds makes it pretty clear that private equity's more liquid cousin took the dislocation square on the chin. According to Chicago-based Hedge Fund Research, almost $210 billion of capital exited the asset class in the third quarter, while in October alone, $115 billion evaporated in performance-based losses and another $40 billion was redeemed by investors.

Outwardly, onlookers may be wondering what all of this means to the decision by many hedge funds to invest in private equity. It would stand to reason that that trend died around October, when limited partners began angling hedge funds for their money. In fact, the most often heard criticism of the hedge funds' move into LBOs and venture capital was that the asset class wouldn't have the patience to commit for the long term.

However, with much of the capital dedicated …