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Bloomberg
Hedge fund titans lose billions to Reddit traders running Amok
(Bloomberg) – For once Main Street is beating Wall Street. Within weeks, two hedge fund legends – Steve Cohen and Dan Sundheim – suffered deadly losses as amateur traders banded together to tackle some of the the world’s most sophisticated investors. In Cohen’s case, he and Ken Griffin ended up rushing to the aid of a third, Gabe Plotkin, whose company was being beaten. Driven by the frantic exchanges of GameStop Corp. and other stocks that hedge funds have bet against, losses incurred over the past few days, it would rank among the worst in the careers of these fund managers. Cohen’s Point72 Asset Management is down 10% to 15% so far this month, while Sundheim’s D1 Capital Partners, one of last year’s best-performing funds, is down about 20%. Melvin Capital, Plotkin’s company, had lost 30% until Friday, a humiliating turnaround for the hedge fund titans, who made a comeback in 2020 by jumping into the wild markets caused by the Covid-19 pandemic. But this crisis has helped push thousands, if not millions of retail traders into the US stock market, creating a new force that at the moment professionals seem powerless to fight. And it’s not just the big names: the Candlestick Jack Woodruff’s capital, at $ 2.8 billion 15% in January on its short bets, while $ 3.5 billion Maplelane Capital lost about 33% through Tuesday, in part due to a position Short on GameStop, according to investors. The hedge fund attackers are a collection of traders using Reddit’s wallstreetbets thread to coordinate their attacks, which appear to focus on stocks known to be held short by hedge funds. The biggest is GameStop, the besieged physical retailer which has climbed over 1,700% this month, but other targets include AMC Entertainment Holdings Inc. and Bed Bath & Beyond Inc. The pain is likely spreading across the industry. hedge funds, with rumors swirling among traders of heavy losses at several companies. The Goldman Sachs Hedge Industry VIP ETF, which tracks the most popular hedge fund stocks, fell 4.3% on Wednesday for its worst day since September. Fund managers hedged their losing short sales while slashing bullish bets for a fourth consecutive session on Tuesday. During this period, their total market exits reached the highest level since October 2014, data compiled by the show of Goldman’s premier brokerage unit.D1, which was founded in 2018 and held approximately $ 20 billion in assets at the start of the year, shaken to some extent by the attacks because private companies account for about a third of its holdings, and the company has reduced its exposure, according to people close to the folder. The fund is closed to new investment and has no plans to open to additional capital, one of the people said, asking not to be named as such decisions are confidential. The loss of D1, described by people informed of the situation, contrasts with 60%. Gain for Sundheim, 43, during last year’s pandemic crisis. Melvin received an unheard-of cash injection from his peers on Monday, receiving $ 2 billion from Griffin, his partners and the hedge funds he heads up at Citadel, and $ 750 million from his former boss. “Social media posts about the Melvin Capital bankruptcy are categorically false,” a representative said. “Melvin Capital is focused on generating high quality risk-adjusted returns for our investors, and we appreciate their support.” Until this year, Plotkin, 42, had one of the best track records among hedge fund security selectors. He had worked for Cohen for eight years and had been one of his biggest producers of money before he left to train Melvin. It has posted an annualized return of 30% since opening, ending last year up more than 50%, according to an investor. Representatives for Point72, D1, Maplelane and Candlestick all declined to comment. Woes at some of the biggest hedge funds may have contributed to the S&P 500’s 2.6% drop on Wednesday, its worst drop since October. One theory behind this decline is that funds are selling long bets to get the cash they need to cover their shorts. Cohen, 64, is perhaps the best-known victim of this year’s unrest so far. The new owner of the New York Mets, whose fund gained 16% in 2020, became a national figure after beating competition from Jennifer Lopez and Alex Rodriguez to buy the ball club. Late Tuesday, Cohen broke his habit of only tweet about the Mets. “Hey stock jockeys keep bringing it,” he wrote on the social media platform. in the third paragraph). Subscribe now to stay ahead with the most trusted source of business information. © 2021 Bloomberg LP
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