Melvin Capital Down 21% After Another Catastrophic Quarter

Tyler Durden's Photo
by Tyler Durden
Wednesday, Apr 06, 2022 - 07:44 PM

The last time we looked at the hedge fund at the center of the "Gamestopped" debacle, we found that Melvin Capital was down a whopping 17% in January after the worst start to the year in decades. Fast forward to today when questions how Gabe Plotkin is still in business ring even clearer, following Bloomberg's report that After a dismal January and a flattish February, Melvin Capital was down another 3.8% in March, dragging its Q1 performance to 20.6% a year after it suffered a historic  55% loss in January of 2021 when the reddit apes sparked a furious ramp across all of Melvin's top short positions and leading to some $7 billion in losses.

The losses follow a tumultuous 2021, when New York-based Melvin Capital ended the year down 39%. Amazingly, after a catastrophic year and quarter, and a bailout by both Steve Cohen and Ken Griffin, Melvin capital still somehow managed $10 billion as of March 1. The only explanation is that some people really have way too much money and they don't care if their billions become millions then thousands in the hands of the Gabe Plotkin. Though maybe the stupidity won't last too much longer: as we reported last month, both Citadel and Point72 have started asking for their money back realizing there will be no hail mary's here.

As Bloomberg notes, of Melvin's six largest U.S. stock holdings at the end of the first year, five declined in the first quarter, with Bath & Body Works sinking by almost a third and Laboratory Corp. of America Holdings falling 16%.

Melvin Capital is the latest in a string of one-trick pony, growth/high-beta/momentum-chasing hedge funds that have been crushed amid market volatility following last year's eruption of most shorted names and the most recent surge in inflationary concerns and Russia’s invasion of Ukraine. 

Faring even worse than Melvin, we recently noted that uber-momo grand daddy of them all, Tiger Global Management’s flagship hedge fund, ended the quarter with a 34% loss, losing tens of billions in the Q1 tech wreck, while Coatue Management fell 10%.

Which brings up a question: can we please stop calling them "hedge" funds? After all, they don't hedge anything and if anything, they underperform the market when it rises, and also underperform it when it drops. A much more accurate description would be "High-beta liquidity trap" funds, although we somehow doubt greater fools would be willing to part with 2 and 20 if they knew they could just buy the SPY for free and outperform 95% of the quote unquote smart money.