Citadel LLC and Point72 Asset Management are investing $ 2.75 billion in the Melvin Capital Management hedge fund, which was hit hard by a series of short bets to start the year.
The cash inflow is expected to help stabilize Melvin, who in 2021 lost 30 percent by Friday, people familiar with the company said. Melvin started the year with $ 12.5 billion and was one of the best-performing hedge funds on Wall Street in recent years. The losses come from Melvin’s range of short bets against companies and have stunned customers and other traders. Among other short positions, Melvin bet against the growing stock of video game retailer GameStop Corp.
Citadel and its partners are investing $ 2 billion and Point72, which has already invested over $ 1 billion in Melvin since 2019, $ 750 million. The investments are in Melvin’s fund and include shares that do not control the company’s revenues. Melvin founder Gabe Plotkin was a top portfolio manager at Point72’s previous firm, SAC Capital Management, before leaving to start Melvin.
It was not possible to determine how much of the Citadel and Point72 revenue would be earned.
Melvin was down about 15% a year by the end of last week – but sharply shortened stocks rose on Friday. Cart Goldman Sachs Group Inc. of the 50 shares with the highest short interest rate, as a share of market capitalization rose on Friday, bringing its earnings for that year to 25%. In comparison, the S&P 500 gained 2.4% for that period. Unlike many other hedge funds, Melvin has an expansive and aggressive short book.