Hedge fund titans Ken Griffin and Steve Cohen boosted Gabe Plotkin’s Melvin Capital, injecting a total of $ 2.75 billion into the company after it lost about 30% this year.
Citadel’s funds and partner companies will invest $ 2 billion, while Point72 Asset Management’s investment will be $ 750 million, the companies said on Monday. In return, investors will receive a non-controlling portion of the 6-year hedge fund’s revenue. Melvin Capital may receive an additional $ 1 billion infusion from other investors on February 1, according to a person familiar with the plans.
The capital injection comes after Melvin Capital, which started the year with about $ 12.5 billion in assets, saw its short bets, including GameStop, go wrong, generating losses, people familiar with the company said.
This year’s stumbling block is rare for Plotkin. His company has averaged 30% a year since it started in December 2014, after nearly a decade working for Cohen.
Short selling has been a dangerous business this year. The best-selling stocks on the Russell 1000 index have risen about 12% so far in January, while the overall index has soared 2.9% year-to-date.
Unlike some managers who have almost given up on short selling in recent years, as stock indexes have risen steadily, Plotkin has continued to place bets on the stock’s decline. At the end of the third quarter, for example, the company had put options – or bets that prices would fall – on 17 US-listed companies, according to a regulatory document.
“Gabe Plotkin and the team have delivered exceptional results throughout Melvin’s history,” Citadel founder Ken Griffin said in a statement. “We have great confidence in Gabe and his team.”
In a statement, Cohen said he has known Plotkin since 2006 and “he is an exceptional investor and leader”.
Mr. Plotkin spent eight years at Cohen’s predecessor company, SAC Capital Advisors, and his company was one of the most successful companies spun off from that store. Mr. Cohen has already invested about $ 1 billion in Melvin.
“I’m incredibly proud to be partnering with Ken Griffin and Steve Cohen,” said Plotkin. “The Melvin team is looking forward to getting to work and rewarding the trust of these two great investment icons.