Citadel LLC and Point72 Asset Management are investing $ 2.75 billion in hedge fund Melvin Capital Management, which was hit hard by a series of short bets to start the year.
The influx of cash is expected to help stabilize Melvin, which lost 30% through Friday in 2021, people familiar with the firm said. Melvin started the year with $ 12.5 billion and has been one of the best-performing hedge funds on Wall Street for the past year. The losses stem from Melvin’s series of short bets against companies and stunned customers and other traders. Among other short positions, Melvin bet against the rising stock of video game retailer GameStop Corp.
Citadel and its partners are investing $ 2 billion and Point72, which has invested more than $ 1 billion in Melvin since 2019, $ 750 million. The investments are in Melvin’s fund and contain non-controlling income shares in the business. Gabe Plotkin, founder of Melvin, was a leading portfolio manager at Point72’s predecessor, SAC Capital Management, before leaving to start Melvin.
It was not possible to determine how much of a revenue share Citadel and Point72 would receive.
Melvin fell by about 15% during the year to end-last week, but shares that fell heavily fell on Friday. Goldman Sachs Group Inc. ‘s basket of the 50 stocks with the highest short-term interest rates as a share of the market capitalization rose on Friday brought its profit for the year to 25%. In comparison, the S&P 500 increased by 2.4% for the period. Unlike many other hedge funds, Melvin has an extensive and aggressive shorthand.