Dan Sundheim’s $20 Billion D1 Capital Loses About 20% This Month

Dan Sundheim’s D1 Capital Partners, one of last year’s top-performing hedge funds, lost about 20% this month through Wednesday, making it one of the biggest victims yet to emerge as retail investors target hedge funds’ favorite positions.

The fund managed about $20 billion as this year began -- far more than rivals such as Melvin Capital and Maplelane Capital that have also taken hits to their portfolios amid the attacks. D1’s loss, described by people briefed on the situation, contrasts with a 60% gain during last year’s pandemic turmoil.

A growing number of hedge funds including Steve Cohen’s Point72 Asset Management have been tallying swift damage to holdings amid wild market swings this month. Cohen’s $19 billion firm is down about 10% to 15% since the start of the year, according to people with knowledge of the matter. It was among investors in Melvin and plowed another $750 million into that firm after traders targeted its short positions.

Behind it all are retail traders, using chat rooms and social media to coordinate attacks on popular hedge fund wagers. The groups have launched short squeezes for stocks such as GameStop Corp. and AMC Entertainment Holdings Inc. that, in turn, have forced money managers to urgently unwind wagers. Hedge fund clients tracked by Goldman Sachs Group Inc. have been covering shorts at an almost unprecedented pace during the past two weeks.

Sundheim, 43, started D1 in 2018 after leaving Viking Global Investors where he was the chief investment officer.

D1 is buffeted to some degree from the attacks because private companies account for roughly a third of its holdings, and the firm has been reducing its exposure. The fund is closed to new investments and has no plans to open for additional capital, one of the people said, asking not to be named because such decisions are confidential.

The Goldman Sachs Hedge Industry VIP ETF, tracking hedge funds’ most-popular stocks, tumbled 4.3% on Wednesday for the worst day since September. All but one of its members were down for the day. Gross leverage, a gauge of hedge-fund risk appetite that takes into account long and short positions, on Monday experienced the largest active reduction since August 2019, data from Goldman show.

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