Two Sigma Investments and DE Shaw, two of the biggest names in the hedge fund industry, suffered losses after an army of retail investors on Reddit improved the markets.
The coordinated short press that caused the price of GameStop and other cheap stocks to rise late in late January has shaken many hedge funds by making some of their carefully matched bets. Melvin Capital, which lost 53 percent in January, is the biggest casualty, but many other funds have suffered losses, particularly on betting on stocks they would suffer during the pandemic.
New York-based Two Sigma, which manages about $ 48 billion in assets and was founded in 2001 by computer scientist David Siegel and mathematician John Overdeck, has 5.3 percent in its fund Absolute Return and 8.6 percent in its Absolute Return Enhanced fund lost. say people who have seen the numbers.
Two Sigma declined to comment. One of the people said his compass macro and risk premium funds were small last month.
David Shaw, DE Shaw, who manages about $ 27 billion, achieved 0.9 percent in his main composite fund, but according to the people familiar with 2.3 percent in his global macro Oculus fund. The firm declined to comment.
The losses are a reversal for DE Shaw after a strong year of returns in 2020. Like many other quantity funds, however, Two Sigma struggled in some of its funds during the pandemic.
While many hedge funds, especially those managed by human traders, made huge profits last year, many computer-driven funds have been caught out by the sharp swing of the markets.
This year, some funds’ models that want to capitalize on small misprints in hundreds of stocks have been hit hard because the interest of small investors has pushed some stocks far above previous valuations. GameStop, the attention of Redditors, rose 1,625 percent last month, while BlackBerry rose 112 percent.
Among the other funds to be plagued this year is Jim Simons’ Renaissance Technologies, which already suffered double-digit losses last year. It lost 9.5 percent this year until the end of January in its Institutional Equity Fund, according to numbers sent to investors and seen by the Financial Times.
According to data group Hedge Fund Research, hedge funds rose 0.9 percent last month, although those focusing on technology, or balancing rising price bets against falling price bets, lost money.
(An earlier version of this story incorrectly states that DE Shaw’s compound fund lost money.)