Citadel to Pull $500 Million From Melvin Amid Plotkin’s Rebound
Citadel to Redeem About $500 Million From Melvin Capital: DJ
(Bloomberg) -- Citadel will redeem about $500 million from Melvin Capital Management, according to a person familiar with the matter, scaling back its $2 billion January infusion into Gabe Plotkin’s hedge fund after the investment turned positive.
Citadel funds and firm partners plan to withdraw the money at the end of the third quarter, the person said. They made the investment, along with $750 million from Point72 Asset Management, in late January when Melvin’s short positions were under attack from retail traders on Reddit. In exchange, they received a three-year minority piece of its revenue. Citadel’s redemption won’t affect that arrangement.
Point72’s capital will remain unchanged, according to another person familiar with the matter.
The January infusion from Plotkin’s former bosses, billionaires Steve Cohen and Ken Griffin, has turned profitable, one of the people said. The bet had lost almost 3% as of the end of June, but Melvin gained 5.4% in July, capping off a six-month advance of 25%.
New York-based Melvin, with about $11 billion in assets, is still down about 43% this year as it claws back from a loss of almost 55% in January. The firm raised new funds in March and April and has continued to hire and add office space.
Plotkin had been considered one of Wall Street’s most successful traders since starting Melvin in 2014, racking up big gains by both investing in stocks and taking aggressive positions against companies. In Melvin’s first year of trading, 70% of the fund’s profits came from his bearish wagers.
Melvin released previously confidential documents earlier this week that showed it held put options on several additional stocks at the end of December, setting the stage for the January rout of his hedge fund that day traders orchestrated through social media. Prices of heavily shorted shares like GameStop Corp. soared, forcing Plotkin to close out his short positions.
Citadel Wellington, meanwhile, is up 8.8% through Aug. 13, according to a person familiar with its performance.
Spokesmen for Melvin, Citadel and Point72 declined to comment.
Dow Jones earlier reported Citadel’s decision.
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