Citadel and Point72 Asset Management have agreed to invest $ 2.75 billion in hedge fund Melvin Capital after its difficult start to the year, in a rare deal that sees two industry titans helping a smaller rival.
Ken Griffin’s Citadel will invest $ 2 billion and Steve Cohen’s Point72 will add $ 750 million, according to people familiar with the deal.
The capital injection comes as Melvin, who was founded by Gabe Plotkin, a protégé of Mr Cohen, suffered double-digit investment losses in the first weeks of January.
“I have known Gabe Plotkin since 2006 and he is an exceptional investor and leader. We are pleased to have the opportunity to invest additional capital and take an unchecked share of the income in Melvin Capital, ”Mr. Cohen said in a statement.
Mr. Griffin said, “Gabe Plotkin and his team have delivered exceptional results throughout Melvin’s history. We have great confidence in Gabe and his team.
Melvin declined to comment.
Point 72 had already invested $ 1 billion for Melvin to manage. Mr. Plotkin worked for Mr. Cohen at SAC Capital until it closed in 2013 amid an insider trading scandal.
Large companies have been known to provide seed funding for small managers when they are going on their own, but this has been relatively unheard of since. hedge funds to invest in another business later – especially when its performance is struggling.
Investment professionals such as Mr. Plotkin are in a hurry by online traders who have enthusiastically invested money in the stock market despite fears that companies are overvalued.
Filings with regulators show Melvin was holding put options on shares of several companies – a bet they will fall – even as the stock market shrugged off a global health crisis to reach new highs.
Melvin is among hedge funds betting against retail investor-favorite game retailer GameStop, whose shares have risen 345% so far this year.