Melvin Capital plans to shut its funds and return the money to its buyers, capping a surprising reversal for a agency that misplaced massive on the surge in meme shares within the early days of the pandemic.
In a letter to buyers that was reviewed by The Wall Street Journal,
Gabe Plotkin,
Melvin’s founder, disclosed the winding down of the funds, saying, “The past 17 months has been an incredibly trying time.”
Melvin had been, till final yr, one of many top-performing hedge funds within the business.
Its executives as lately as final week had been soliciting shoppers for his or her ideas on what new charge preparations appeared truthful to them and to Melvin going ahead. Mr. Plotkin had beforehand tried to put off Melvin’s so-called high-water mark, a regular business association wherein hedge funds don’t gather efficiency charges till their shoppers are made complete from prior funding losses. The proposal met with resistance from a lot of Melvin’s shoppers, and Mr. Plotkin withdrew that plan and apologized to buyers.
Investors had been sharing numerous proposals they thought could be truthful, together with Mr. Plotkin conserving the agency’s present phrases till the tip of the yr after which implementing a modified high-water mark that may have let Melvin gather a decrease efficiency charge within the interim, folks accustomed to the agency mentioned. Hopes of massive paydays assist encourage and preserve funding groups intact, fund managers say.
While Melvin made up a few of its big January 2021 losses from the rally in
GameStop Corp.
and different so-called meme shares, its concentrate on fast-growing corporations dealt it additional setbacks this yr as buyers soured on such shares and its losses widened. This yr by April, Melvin had misplaced 23%. Since its begin, it has averaged an 11.9% return.
Its observe document of about 30% a yr after charges earlier than 2021 was among the many finest on Wall Street.
Write to Juliet Chung at [email protected]
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Source: www.wsj.com”