Melvin Capital Lost 53% in January, Hurt by GameStop and Other Bets
Citadel, its partners and Point72 took losses from their investment in the hedge fund
Melvin Capital Management, the hedge fund that has borne the brunt of losses from the soaring stock prices of heavily shorted stocks recently, lost 53% in January, according to people familiar with the firm.
Melvin was founded by Gabe Plotkin, a former star portfolio manager for hedge-fund titan Steven A. Cohen. It started the year with about $12.5 billion and now runs more than $8 billion. The current figure includes $2.75 billion in emergency fundsCitadel LLC, its partners and Mr. Cohen’s Point72 Asset Management injected into the hedge fund last Monday.
As part of the deal, they got non-controlling revenue shares in Melvin for three years. So far, Citadel, its partners and Point72 have lost money on the deal, though the precise scope of the loss was unclear Sunday.
Melvin has massively de-risked its portfolio, said a client. People familiar with the hedge fund said its leverage ratio—the value of its assets compared with its capital from investors—was the lowest it has been since Melvin’s 2014 start. They also said the firm’s position-level liquidity, or its ability to exit securities in its portfolio easily, had increased significantly.
New and existing clients have signed up to invest money into Melvin on Feb. 1, according to the people familiar. It was unclear how much they would be adding.
Melvin had established itself in recent years as one of the top hedge funds on Wall Street, but a short position in GameStop Corp. GME 67.87% hurt the firm in recent weeks. Losses extended beyond GameStop, with declines coming from throughout its portfolio during a period of market turmoil in January. Positions in which Melvin had publicly disclosed owning put options—bearish contracts that typically profit as stocks fall—in its last quarterly regulatory filing soared, while positions in companies it held sold off.