Melvin Capital Lost 53% in January, Hurt by GameStop and Other Bets – WSJ

Melvin Capital Management, the hedge fund that has borne the brunt of losses from the soaring stock prices of heavily shorted stocks recently, lost 53% in January, according to people familiar with the firm.

Melvin was founded by Gabe Plotkin, a former star portfolio manager for hedge-fund titan Steven A. Cohen. It started the year with about $12.5 billion and now runs more than $8 billion. The current figure includes $2.75 billion in emergency funds Citadel LLC, its partners and Mr. Cohen’s Point72 Asset Management injected into the hedge fund last Monday.

As part of the deal, they got non-controlling revenue shares in Melvin for three years. So far, Citadel, its partners and Point72 have lost money on the deal, though the precise scope of the loss was unclear Sunday.

Melvin has massively de-risked its portfolio, said a client. People familiar with the hedge fund said its leverage ratio—the value of its assets compared with its capital from investors—was the lowest it has been since Melvin’s 2014 start. They also said the firm’s position-level liquidity, or its ability to exit securities in its portfolio easily, had increased significantly.

New and existing clients have signed up to invest money into Melvin on Feb. 1, according to the people familiar. It was unclear how much they would be adding.

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