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In March, Gabe Plotkin's Melvin Capital took a step back from digging itself out of its GameStop hole.
The $8 billion equity hedge fund lost 7% last month, finishing the first quarter down almost 49%, sources told Insider. The average hedge fund, Hedge Fund Research found, made 1% last month and earned just over 6% over the first quarter. Melvin declined to comment.
The firm was the focus of a retail-trading frenzy, coordinated on Reddit messaging boards, of GameStop, a video-game retailer that Melvin shorted. The short squeeze caused one of the best-performing hedge funds of the past half-decade to lose billions in a matter of days, which in turn caused losses at managers such as Maplelane Capital and D1 Capital.
After January, when Melvin lost 53% and received $2.75 billion in new money from Steve Cohen — the founder of Point72 and Plotkin's former boss — and Citadel founder Ken Griffin, Plotkin's firm quickly bounced back with 22% returns in February.
A Bloomberg piece on the firm's February performance reported that Plotkin was taking smaller short positions going forward and had stopped using exchange-traded put positions — which are included in managers' regulatory filings — to bet against companies. He also instructed his data-science team to monitor social media and other message boards for conversations around crowded retail-trading moves, something many funds invested in after the GameStop saga.
Plotkin, who is a minority owner of the NBA's Charlotte Hornets, was one of a few finance big shots to appear before a House of Representatives committee in February to discuss what happened in the last week of January. He said in his testimony that his family dealt with anti-Semitic messages and threats while Reddit traders piled into GameStop, AMC, and other companies he had bet against.
He also made it clear that while his firm received billions in new capital from Cohen and Griffin, the money did not bail out his hedge fund, which is named after his grandfather.
"To be sure, Melvin was managing through a difficult time, but we always had margin excess and we were not seeking a cash infusion," he said at the House hearing.
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