Citadel LLC is further paring back its $2 billion investment in Melvin Capital Management after the hedge fund stumbled in its effort to recover from a near collapse triggered by surges in GameStop Corp
GME,
and other “meme stocks” early last year.
Citadel in late January asked to redeem half the money the firm and its partners have left in Melvin’s hedge fund, after originally halving their investment late last year, as Melvin racked up double-digit losses for the second January in a row, people familiar with the matter said. The latest redemption request would be paid out at the end of March, the people said.
Citadel and its partners invested $2 billion in January 2021, alongside a $750 million influx from Steven A. Cohen’s Point72 Asset Management, in exchange for a share of Melvin’s fees over the next three years. The rare intra-month investment, made as the $12.5 billion hedge fund was suffering mounting losses from the ferocious meme-stock rally, enabled Melvin to reduce its leverage and avoid being a forced seller.
The Wall Street Journal reported in August that Citadel and its partners planned to redeem roughly $500 million from Melvin. Citadel, which manages about $45 billion, ultimately wound up withdrawing more, halving its investment, after Melvin raised money from other investors.
Founded by Gabe Plotkin, a former star portfolio manager for Mr. Cohen, Melvin was one of the top hedge funds on Wall Street when it lost about $6.8 billion—more than half its assets—in January 2021 as individual investors banded together to target the firm and bets it had made against GameStop and other companies. Strategy changes helped the fund claw back some of those losses in the remainder of last year, but Melvin lost 15% this January as technology and other fast-growing companies it had bet on sold off.
Point72 hasn’t redeemed any of its recent investment, people familiar with the matter said. Point72 benefited from Mr. Plotkin’s performance before last year, having been a Day-1 investor via its predecessor firm, SAC Capital Advisors, when Melvin launched in 2014. Point72 had more than $1 billion invested in Melvin as of 2019.
