Citadel has apparently decided to pull around USD 500 million from Melvin Capital Management. According to a person privy with the development, the money that is being redeemed is of the USD 2 billion invested in Melvin. The Citadel funds and firm partners are reportedly planning to withdraw money in the third quarter. This will scale back the investment into Gabe Plotkin’s hedge fund. A total of USD 2.75 billion was invested in Melvin’s hedge fund earlier in January this year. Out of this, USD 750 million was invested from Point72 Asset Management. In exchange for a rare monthly investment, the two companies received a three-year dominant revenue share. Reports suggest that the capital of Point72 will remain unchanged after the pull-out. So far no one has commented on the development.
Melvin was founded by Gabe Plotkin, former star portfolio manager of billionaire Steve Cohen. Melvin remained one of the top-performing hedge funds in recent years until the portfolio was overturned because of the misfortune of the meme stock. While some hedge funds managed to get benefitted from unprecedented market movements, Melvin lost over 50 percent within few weeks. The loss is estimated to be around USD 6 billion. New York-based Melvin still has assets worth USD 11 billion. The firm has also recently raised new funds and has been hiring new employees and adding office space.
Plotkin, considered to be one of Wall Street’s most successful traders in the past few years, has made some big gains by both investing in stocks and taking aggressive positions against companies. Melvin earned 70 percent of its profit from its bearish wagers. It had posted annual returns of 30 percent between 2014 and 2020, which is considered good in the market. As per the confidential documents released by Melvin, it held put options on several additional stocks at the end of the last year.
