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Ken Griffin’s Citadel LLC and Citadel partners plan to buy back around $ 500 million of the $ 2 billion they invested in Melvin Capital Management after Melvin was criticized with bad short bets on GameStop Corp. and other booming actions, people familiar with the matter said.
Citadel and Steven A. Cohen’s Point72 Asset Management together invested $ 2.75 billion in Melvin’s hedge fund on January 25 as Melvin was bleeding money. In return for the rare intra-month investments, the two companies received unchecked income shares in Melvin for three years. The arrangement means that they share in the management and performance fees that Melvin collects from its clients during this period, but do not obtain any control over Melvin or its investments.
Citadel will retain its share of the revenue, some people familiar with the matter said. It was not possible to determine on Friday whether Citadel plans to buy back additional money later, but someone familiar with Citadel said she expects to remain a big investor.
Founded by Gabe Plotkin, a former star portfolio manager of Mr. Cohen, Melvin had been one of the top performing hedge funds in recent years until the equity mishap in even January wreaked havoc on his portfolio. Individual investors grouped together on forums like Reddit and Discord have won for increasing the shares of GameStop and other companies. Some hedge funds have profited from unprecedented market movements. Melvin lost 54.5%, or more than $ 6 billion, in just a few weeks.
The dizzying rise of a handful of stocks, along with mounting losses from Melvin and other leading hedge funds, including Point72 and D1 Capital Partners, shocked Wall Street and individual investors and triggered a congressional hearing , regulatory investigations and federal investigations.
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