Citadel will redeem about $ 500 million from Melvin Capital

Some of the people familiar with the matter say that Citadel will maintain its revenue share. It could not be determined on Friday whether Citadel plans to change additional money later, but someone familiar with Citadel said he hopes to remain a large investor.

Founded by Gabe Plotkin, a former star portfolio manager for Mr Cohen, Melvin had been one of the best-performing hedge funds in recent years until the meme-stock mishap in January changed his portfolio. Individual investors grouped in forums like Reddit and Discord got the win to increase the shares of GameStop and other companies. Some hedge funds benefited from unprecedented market movements. Melvin lost 54.5%, or more than $ 6 billion, in a few weeks.

The dizzying rise in a handful of shares, in addition to growing losses to Melvin and other prominent hedge funds, including Point72 and D1 Capital Partners, derailed Wall Street and individual investors and sparked a hearing in Congress, regulatory investigations and federal polls.

Citadel, a more than $ 38 billion hedge fund company that employs merchant equipment, has rarely had such a considerable investment with an external manager, people familiar with the firm said. Still, it has an introductory track record when other funds are in trouble, earning billions by buying distressed assets from failed hedge funds Amaranth Advisors LLC and Sowood Capital Management LP, as well as Enron Corp.

Melvin finished the week of Jan. 18 after losing about 30 percent during the year. Citadel, its partners and Point72, already a big investor in Melvin, invested the following Monday. But the next two days were brutal for fundraising fundamental fundraising, as widespread market turmoil brought funds down. Hedge funds reduced their market exposure on both the long and short sides of their portfolios as they worried about erratic stock movements and in turn caused losses to other funds.

Melvin has produced a 25% return from February 1 to the end of July, making it one of the best performing hedge funds of the period. But its losses as a result of Citadel and Point72’s immediate investments significantly reduced the gains from those funds in its January bets on Melvin, people who were familiar with the matter said. Melvin continues to fall by about 43% during the year through July.

Point72 maintains its investment in Melvin, said one person familiar with the investment.

Plotkin has told people he didn’t necessarily expect Citadel to keep all of its investment in Melvin long-term, people reported on the talks. A person familiar with Melvin said he plans to replace the outgoing money with investments from new and existing customers.

Melvin has raised about $ 1 billion in recent months, helping to manage its more than $ 11 billion in assets and has signed new contracts. He has also signed a lease for an office in Miami Beach, Florida, which he will maintain in addition to his New York office.

Getting new money can generate investment and management fees, which helps attract and retain talent. Existing money is subject to a high mark, or to the point where investment gains offset losses and managers can recoup performance fees. Melvin’s performance commissions are among the highest in the industry, up 30% on investment gains.

Write to Juliet Chung to [email protected]