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Within weeks, two hedge fund myths – Steve Cohen and Dan Sundheim – suffered heavy losses, as hobby traders gathered to take on some of the world’s most seasoned investors.
Cohen’s Point 72 Fund documents have fallen 10-15% so far this month, while Sundheim’s D1 Capital Partners fund, one of the best performing funds of the past year, has fallen by 20%, while Melvin Capital, a subsidiary, has lost 20%, by Gabby Plotkin, 30% until Friday.
And that war led Cohen and Ken Griffin to rush out to help Gabe Plotkin, whose company was hit, as around $ 2.75 billion in aid was spent on closing some options contracts. open and damage to loss.
Although hedge funds profited from the pandemic last year, the rush of millions of individual traders to the US stock exchange created a new force that professionals today seem unable to combat.
Their attackers were a group of traders using the Reddit platform to coordinate their attacks, which appear to focus on stocks known to be sold by hedge funds.
The attack was led by GameStop stocks, up 1,700% this month, as well as AMC and Bed Bath & Beyond. From what was reported by “Bloomberg” and seen by “Al Arabiya.net”.
The Goldman Sachs VIP ETF, which tracks the most popular stocks for hedge funds, fell 4.3% on Wednesday, its worst day since September.
This battle saw fund managers hedge their short sales, or what are known as “short sales”, and also reduced bullish bets for the fourth straight session on Tuesday, bringing total market exits to the highest. high since October 2014, according to data collected by the main brokerage unit of Golman Sachs.
Short selling is a method that investors follow to seize the opportunity of any unexpected drop in the price of a particular stock, whereby the investor borrows the stock from the broker and then sells it, and if the investor is affected. and as the price drops, he pays for the borrowed stock by buying them at the lowest price, and so the investor makes a profit from the price difference between the price at which he sold and the price at which he then bought it , and in this case, if the stock price falls, the investor will make a profit, and if he rises from me at a loss
Another fund for Melvin Capital, worth $ 3.5 billion, lost about 33% of its assets this month to Tuesday due to a bet on the decline of GameStop.
Difficulties faced by some of the largest hedge funds may have contributed to the S&P 500’s 2.6% drop on Wednesday, its worst drop since October, as one of the theories behind the slowdown is that funds are selling off their investments. long term to get the cash they need. to cover their shortfall, some actions are down.
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