Melvin Capital Considers Scrapping Current Fund to Start a New One in July After Suffering Heavy Losses – Report
2022.04.21 15:51
Melvin Capital Considers Scrapping Current Fund to Start a New One in July After Suffering Heavy Losses – Report
Hedge fund Melvin Capital is considering a new plan that would see the fund return the capital to its investors, allowing them to reinvest it in a novel fund which would also be run by Gabe Plotkin, according to CNBC.
Plotkin, founder and CEO of Melvin Capital, is looking to unwind the current fund by the end of June to start a new one on July 1 using the capital the fund’s investors decide to reinvest. If the plan moves forward, Plotkin would achieve this without having to bring Melvin investors back to even on their invested money before he could make a performance profit.
This is because it would be extremely difficult for Plotkin to bring investors back even after the fund sustained a 39% loss in 2021 and an additional 21% loss this year.
Plotkin plans to keep the new fund at or below $5 billion in capital and focus on shorting stocks once again, a strategy that yielded him substantial returns over the past years before taking a heavy blow amid the meme stock craze in January 2021.
The move would give Plotkin and Melvin Capital a second chance after a year and a half of disappointing performance, as well as enable him to retain his employees who were likely to leave due to lack of performance fees.
The impact of the new plan remains unclear as well as how much capital would Melvin investors reinvest in the new fund.
By Senad Karaahmetovic
