Hedge Fund Melvin Sustains 53% Loss After Reddit Onslaught

An anonymous reader quotes a report from Ars Technica: Melvin Capital, the hedge fund that was wrongfooted by retail traders who drove up shares in GameStop and other companies it had bet against, lost 53 percent in January, according to people familiar with the firm's results. The New York-based hedge fund sustained a $4.5 billion fall in its assets from the end of last year to $8 billion, even after a $2.75 billion cash injection from Steve Cohen's Point72 Asset Management and Ken Griffin's Citadel. Melvin became the target of retail traders who coordinated to drive up the share price of GameStop on online message boards such as Reddit, after the firm disclosed its bet against the company in regulatory filings. On Wednesday Melvin said it had exited its bet against GameStop and repositioned its portfolio. The firm moved to reduce risk in its investments following a turbulent start to January when it lost 30 percent in the first three weeks. Melvin's leverage ratio is at the lowest it has been since the firm's founding in 2014, said a source familiar with the firm. The news of Melvin's January performance was first reported by The Wall Street Journal. The GameStop saga marks a fall from grace for Melvin, which gained 52 percent last year, ranking it among the best performing hedge funds. Founder Gabe Plotkin was one of Mr Cohen's most prominent traders at SAC Capital, until it shut down amid an insider trading scandal.

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