Melvin Capital, Gabe Plotkin’s hedge fund that suffered heavy losses last year when it bounced back from wrong bets on GameStop, is being shut down, according to a letter sent to investors Wednesday and reviewed by The New York Times.
Mr. Plotkin wrote to his investors that he had decided the “appropriate next step” was to liquidate the fund’s assets and return cash to all investors.
Mr Plotkin, who founded Melvin in 2014, also wrote that he acknowledged that he “need to move away from external capital management”.
Plotkin, a protégé of hedge fund billionaire and owner of the New York Mets, Steven A. Cohen, had bet that stocks of GameStop, AMC Entertainment, and other 1990s mainstays would plummet as their companies shrank.
Instead, shares skyrocketed as amateur investors, coordinated through Reddit, Twitter and other social media sites and determined to outsmart the major Wall Street funds, continued to buy up shares and push their prices up.
That caused Melvin, which started 2021 with more than $12 billion, to lose 53 percent in January, forcing it to hedge its so-called short positions. It was supported by a $2.75 billion bailout from the hedge funds Point72, run by Mr. Cohen, and Citadel, as well as fresh capital from new investors.
Citadel started paying back its investment last year and had no money with Melvin since last month. Point72 has also bought back the infusion it made in the wake of the GameStop frenzy, according to a person familiar with that company’s investments.
Before he decided to close his fund, Mr. Plotkin had considered rebuilding it. The decision to shut down Melvin, who named Mr. Plotkin after his late grandfather, is a blow to Mr. Plotkin’s reputation. He had achieved fame as one of the most successful portfolio managers to emerge from Mr. Cohen’s former hedge fund, SAC Capital.
Bloomberg previously reported the news of Melvin’s closure.
