Gabe Plotkin’s Melvin Capital Management ended the first half of 2021 down 46% as the hedge fund struggled to bounce back from a vicious attack by Reddit traders on its short positions.
The firm, which plunged in January as its bearish bets on companies including GameStop Corp. and AMC Entertainment Holdings Inc. were besieged by a retail-driven buying spree, was up about 1% in June, according to people familiar with the matter. Melvin now calculates its loss in the first month of the year at almost 55%, compared with a preliminary estimate of 53%, the people said.
After posting a strong rebound of 22% in February, performance has been inconsistent: Melvin dipped again in March, then gained 5.4% in the second quarter. In total, the fund returned about 18% from Feb. 1 through the end of June.
Melvin's Rocky 2021
Still, the losses mean a late-January infusion into the fund by Plotkin’s former bosses, billionaires Steve Cohen and Ken Griffin, has lost almost 3% so far, according to a person familiar with the matter. Cohen’s Point72 Asset Management, together with Griffin, Citadel funds and firm partners, pulled together a deal in a matter of hours to give Melvin $2.75 billion in exchange for a three-year minority piece of its revenue.
Melvin, Point72 and Citadel declined to comment.
Some hedge fund observers question whether Plotkin — who has changed the way he makes short bets in the wake of the fiasco — can still produce blockbuster returns without taking aggressive positions against companies. In Melvin’s first year of trading, 70% of the fund’s profits came from his bearish wagers.
“I don’t think investors like myself want to be susceptible to these type of dynamics,” Plotkin testified during a House Financial Services Committee hearing, referring to the astronomical level of short interest in GameStop stock that preceded the volatility.
Bloomberg has reported that his firm, which managed $11 billion as of July 1, is taking smaller-sized short positions to limit exposure to single companies. Plotkin also told his team of data scientists to scour social media and message boards to look for shares that retail investors are rallying around.
This article was provided by Bloomberg News.
