Steve Cohen’s Bet on Melvin Leaves Point72 Trailing Hedge-Fund Peers

Steve Cohen’s Point72 Asset Management barely made money in the first half of 2021, weighed down in part by a wager the billionaire made on Gabe Plotkin, one of his former star traders.

The $22 billion Point72 returned just 1.2% in the first six months of the year, lagging behind other large multi-strategy hedge funds such as Citadel, which was up 4.4%, and Millennium Management, which gained 6.5%.

Cohen’s longtime investment in Plotkin’s Melvin Capital Management lost Point72 roughly $500 million this year through June, mostly due to a Reddit-fueled short squeeze in January that cut Melvin’s assets by more than half that month.

Read more: Melvin Struggles to Shake Reddit Attack With 46% Loss So Far

During the height of the meme-stock mania in late January, Cohen invested another $750 million in Melvin. At the same time, Citadel founder Ken Griffin and his firm’s partners and hedge funds ponied up $2 billion. That investment is down about 3%, according to a person familiar with transaction.

Even with this year’s losses, Plotkin has been a profitable trade for Cohen. Point72 invested $200 million in Melvin when he started in 2014, and that sum grew to about $1 billion by the end of 2020 as Plotkin posted multiple years of double-digit returns.

Point72 had other issues this year beyond Melvin’s struggles. The firm, like many generalist equity funds, got whipped around as value stocks surged on the back of the post-pandemic recovery, only to be overtaken yet again by technology shares and other growth companies that have dominated the market for years.

That fake-out was particularly painful for value investor David Einhorn, who has been insisting that beaten down shares were set to soar. His Greenlight Capital plunged 7.6% in June, for a first-half loss of 3%. The fund is down a cumulative 32% since the end of 2014.

Some other hedge-fund managers who trade equities had similar struggles in 2021. Andreas Halvorsen’s Viking Global Investors returned just 1% this year. Dan Sundheim’s D1 Capital Partners, which also got swept up by the skyrocketing price of meme-stock shares in January, is up about 4%, compared with a gain of more than 50% in 2020.

Other takeaways from hedge funds’ first-half returns:

  • Macro investors also had trouble navigating the market’s twists and turns. The benchmark 10-year U.S. Treasury yield unexpectedly jumped 83 basis points in the first quarter, the most since 2016, only to tumble by 27 basis points in the next three months. Brevan Howard Asset Management, which posted a 27% return in its master fund in 2020, the biggest gain in 17 years, is barely even so far in 2021.
  • The growth-value push and pull has also confounded quant funds. The Renaissance Institutional Equities fund is up about 1.1% in the first half, dragged lower by a 4.3% loss in June.
  • Despite the single-digit returns of many large investors, the industry overall saw some of the strongest first-half gains in years. Hedge Fund Research’s fund-weighted composite index was up 10% in the first six months of 2021, while its equity index surged 12.7%.
  • A few specialty funds have outperformed. Impala Asset Management, which invests in resource-focused stocks, is up 49% in the first half amid a surge in commodity prices. Glenview Capital Management, which soared 25% in the first quarter thanks to successful wagers on health care stocks, added to its gains in the three months through June, for a total first-half return of 32.5%.
FundYTDJuneStrategy
Impala49-2.7resource-focused stocks
Glenview flagship fund32.5-2.3equities
Third Point Offshore15.2Flatevent
Coatue Qualified Partners5.44.1equities
Millennium Management6.50.8multi-strategy
Sculptor master fund61.3multi-strategy
Paloma Partners5.7Flatmulti-strategy
Citadel Wellington4.4-1.3multi-strategy
Falcon Edge4.1Flatspecial situations
D1 Capital44equities
ExodusPoint2.6Flatmulti-strategy
Balyasny Atlas Enhanced2Flatmulti-strategy
Point721.2Flatmulti-strategy
Renaissance Institutional Equities1.1-4.3quant equity
Viking Global Equities10.2equities
Brevan Howard master fund0.8-1.6macro
Rokos Global MacroFlat-5macro
Two Sigma CompassFlat2.2quant
Greenlight Capital-3-7.6equities
Whale Rock-58equities

Performance figures are according to people familiar with the matter. Representatives for the firms declined to comment.

©2021 Bloomberg L.P.

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