Citadel LLC and Point72 Asset Management are investing $ 2.75 million in hedge fund Melvin Capital Management, which has been hit hard by a series of short bets to start the year.
The influx of cash is expected to help stabilize Melvin, which in 2021 has lost 30% by Friday, people familiar with the company said. Melvin started the year with $ 12.5 billion and had been one of the best-performing hedge funds on Wall Street in recent years. The losses come from Melvin’s variety of short bets against companies and have surprised customers and other traders. Among other short positions, Melvin bet against the growing shares of the video game store GameStop Corp.
Citadel and its partners are investing $ 2 billion and Point72, which already had more than $ 1 billion invested in Melvin in 2019, has $ 750 million. Investments are made in the Melvin fund and include shares that do not control the company’s revenue. Melvin founder Gabe Plotkin was the top portfolio manager for Point72’s predecessor, SAC Capital Management, before he left to start Melvin.
It was not possible to determine what part of the revenue Citadel and Point72 would receive.
Melvin had fallen about 15% during the year to the end of last week, but very short stocks soared on Friday. The basket of the 50 shares of Goldman Sachs Group Inc. with higher short-term interest as a market capitalization share soared on Friday and increased 25% in year-over-year earnings. In comparison, the S&P 500 had gained 2.4% during the period. Unlike many other hedge funds, Melvin has an expansive and aggressive short book.