Bloomberg
Hedge Fund Titans lose billions to Reddit merchants running Amok
(Bloomberg) – Main Street defeats Wall Street. In a matter of weeks, two legions of hedge funds – Steve Cohen and Dan Sundheim – suffered bruises as amateur traders teamed up around some of the world’s most sophisticated investors. In the case of Cohen, he and Ken Griffin eventually rushed to the aid of a third, Gabe Plotkin, whose firm was about to be defeated. Driven by the insane trading in GameStop Corp. and other stocks that hedge funds have been betting on, the losses suffered over the past few days would be the worst in some of the money managers’ careers. Cohen’s Point72 Asset Management has declined 10% to 15% so far this month, while Sundheim’s D1 Capital Partners, one of last year’s best performing funds, is down about 20%. Melvin Capital, a Plotkin firm, lost 30% until Friday. This is a humble turnaround for the hedge fund titans, who made a comeback in 2020 by applying to the wild markets caused by the Covid-19 pandemic. But the crisis has helped push thousands, not millions, of retailers into the U.S. stock market, creating a new force that makes professionals seem powerless to fight for the time being. Their attackers are a collection of traders who use Reddit’s wall-to-wall wire to coordinate their attacks, which appear to be focused on stocks known for being held short by hedge funds. Most important is GameStop, the beleagured retailer that rose more than 1,700% this month, but other targets include AMC Entertainment Holdings Inc. and Bed Bath & Beyond Inc. The pain is probably spreading across the hedge fund industry, with rumors spreading among traders about huge losses at various businesses. The VIP ETF of Goldman Sachs Hedge Industry, which tracks the most popular stocks of the hedge funds, tumbled 4.3% on Wednesday for the worst day since September. Fund managers covered their money short-selling losses as they pruned for a fourth consecutive bet on Tuesday. During that period, their total outflow from the market reached its highest level since October 2014, according to data compiled by Goldman’s first brokerage unit. D1, which was established in 2018 and has about $ 20 billion in assets at the beginning of the year. According to the people familiar with the business, the attacks were thwarted to some extent because private businesses accounted for about a third. The fund is closed for new investments and does not intend to open for additional capital, one of the people said and asked not to be named because such decisions are confidential. gains for Sundheim (43) during the pandemic unrest last year. Melvin received an unprecedented cash flow from his peers on Monday, receiving $ 2 billion from Griffin, his partners and the hedge funds he manages at Citadel, and $ 750 million from his former boss. , Cohen. “The social media posts about Melvin Capital going bankrupt are extremely false,” said a representative. “Melvin Capital is committed to delivering high quality returns to our investors, and we are appreciated for their support.” Plotkin, 42, has had one of the best records among hedge fund stock voters so far this year. He worked for Cohen for eight years and was one of his biggest moneymakers before founding Melvin. According to an investor, it has increased its annual return by 30% since the opening, which ended last year, by more than 50%. Another fund, the $ 3.5 billion Maplelane Capital, lost about 33% this month through Tuesday due to a short position over According to investors, GameStop said. The representatives of Point72, D1 and Maplelane did not want to comment. The battle with some of the biggest hedge funds may have contributed to the 2.6% drop in the S&P 500 on Wednesday, the worst drop since October. One theory behind the decline is that funds are selling long bets to get the cash they need to cover their shorts. Cohen, 64, is perhaps the most notorious victim of this year’s unrest. The new owner of the New York Mets, whose fund has risen 16% in 2020, has become a national figure after beating the competition from Jennifer Lopez and Alex Rodriguez to buy the ball club. Cohen on Tuesday abandoned his usual habit of just tweeting about the Mets. “Hey stock joggers are producing it,” he wrote on the social media platform. For more articles like this, please visit us at bloomberg.com. Sign up now to stay ahead of the most trusted business resource. © 2021 Bloomberg LP