Citadel, Point72 Back Melvin With $2.75 Billion After Losses
(Bloomberg) -- Hedge fund titans Ken Griffin and Steve Cohen boosted Gabe Plotkin’s Melvin Capital, injecting a total of $2.75 billion into the firm after it lost about 30% this year.
Citadel funds and firm partners will invest $2 billion, while Point72 Asset Management’s investment will be $750 million, the firms said Monday. In return, the investors will get a non-controlling revenue share in the six-year-old hedge fund. Melvin Capital may receive an additional $1 billion infusion from other investors on Feb. 1, according to a person familiar with the plans.
The capital infusion comes after Melvin Capital, which started the year with about $12.5 billion in assets, has seen its short bets, including GameStop Corp., go awry, spurring the losses, people familiar with the firm said.
This year’s stumble is rare for Plotkin. His firm has returned an average 30% a year since it was started in December 2014 after nearly a decade working for Cohen.
Short-selling has been a perilous business this year. The most-shorted stocks in the Russell 1000 index have climbed about 12% so far in January, while the index overall has risen 2.9% year-to-date.
Unlike some managers who have nearly given up on shorting in recent years as stock indexes marched ever higher, Plotkin has continued to make bets on falling stocks. At the end of the third quarter, for example, the firm had puts -- or bets that prices would fall -- on 17 U.S.-listed companies, according to a regulatory filing.
“Gabe Plotkin and team have delivered exceptional results over the history of Melvin,” Citadel founder Ken Griffin said in a statement. “We have great confidence in Gabe and his team.”
In a statement, Cohen said he has known Plotkin since 2006 and “he is an exceptional investor and leader.”
Plotkin spent eight years at Cohen’s predecessor firm, SAC Capital Advisors, and his firm has been one of that shop’s most successful spin-outs. Cohen previously invested about $1 billion in Melvin.
“I am incredibly proud to partner with Ken Griffin and Steve Cohen,” Plotkin said. “The team at Melvin is eager to get to work and reward the confidence of these two great investment icons.
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