Melvin Capital
| Company type | Private |
|---|---|
| Industry | Investment management |
| Founded | 2014 |
| Founder | Gabriel Plotkin |
| Defunct | June 2022 |
| Fate | Ceased operations and returned capital to investors |
| Headquarters | New York City , United States |
Key people | Gabriel Plotkin (Founder and Chief Investment Officer), David F. Kurd (Chief Operating Officer) |
| Products | Hedge fund investment management |
Melvin Capital Management was a New York City-based American investment management company. Established in 2014 by Gabriel Plotkin, the firm’s name honored his late grandfather.
On May 18, 2022, Plotkin declared that the fund would cease operations and return the remaining capital to investors by June of that year. As of April 2022, its assets under management (AUM) were estimated at around $7.8 billion.
The firm concentrated its investments primarily in technology and consumer sectors and gained recognition for generating strong annual returns compared to other hedge funds. Reports indicated it managed approximately $8 billion in AUM as of January 2021.
During the 2021 GameStop short squeeze, Melvin Capital experienced losses amounting to 53%, equivalent to $6.8 billion, including daily declines exceeding $1 billion. The fund’s assets dropped 49% in the first quarter of 2021, closing the year with a loss exceeding 39%, while the S&P 500 index increased by 28.7%. In January 2022, the fund began the year down 17%.
Background
Gabriel Plotkin graduated from Northwestern University in 2001 with a degree in economics before joining Ken Griffin's hedge fund Citadel and later North Sound Capital in Connecticut. Prior to founding Melvin Capital, he worked as a trader at Steve Cohen’s SAC Capital, overseeing a portfolio predominantly composed of consumer stocks valued near $1.3 billion.
Plotkin was referenced in the SEC’s civil complaint against Michael Steinberg, a SAC portfolio manager implicated in insider trading. While Plotkin allegedly received emails containing insider information during his time at SAC, he faced no charges.
Foundation and performance before 2021
After departing SAC in late 2014, Plotkin launched Melvin Capital, naming it after his late grandfather who was a small business owner. He initially raised close to $1 billion. Plotkin characterized Melvin Capital as "a very human-intensive place," emphasizing numerous analysts and a strong focus on short selling.
From 2014 through 2020, Melvin Capital achieved average annual returns of approximately 30%, distinguishing itself among hedge funds for its high performance. In its first full year, the fund delivered a 47% return, placing second on Bloomberg’s 2015 list of top-performing funds with over $1 billion AUM—significantly outperforming Steve Cohen's Point72 that year.
In 2015, nearly two-thirds of the fund’s pre-fee returns of 67% stemmed from short positions, including wagers against bankrupt companies like JCPenney and SunEdison. The fund posted a 41% gain in 2017 with notable investments in Chewy, Amazon, Las Vegas Sands, Alibaba, and short positions on GameStop. In 2019, Melvin Capital returned 44%; The Wall Street Journal reported that about one-third of Point72’s gains that year were attributable to Melvin.
By the end of 2020, Melvin Capital reported a return of 52%, ranking among the top-performing hedge funds. In September that year, it appeared on Poland's Short Sale Registry due to holding a short position representing 0.55% in game developer CD Projekt on the Warsaw Stock Exchange (WSE).
Melvin Capital maintained its status as a leading hedge fund until 2021. The firm charged investors an annual management fee of 2% plus up to 30% of profits—one of the highest fee structures within the industry.
2021 losses
At the start of 2021, Melvin Capital incurred losses exceeding 30%, primarily due to unsuccessful short positions such as GameStop. The subreddit r/WallStreetBets spurred extensive buying activity that sharply increased GameStop’s stock price. In January, Citadel and Point72 invested $2.75 billion into Melvin for non-controlling revenue shares. Melvin exited its GameStop short position on January 26, refuting bankruptcy rumors. Despite this move, losses surpassed 30%, with daily losses reportedly exceeding $1 billion during the peak of the squeeze.
Melvin’s short interest accounted for over 139% of GameStop's shares outstanding, making it the most heavily shorted stock worldwide at that time. By January's end in 2021, Melvin had declined by 53%. Although it posted a gain of 22% in February, it still required a roughly 75% increase to recover losses for earlier investors. By the close of Q1 2021, losses reached approximately 49%; by Q2 they stood at a year-to-date decline of about 46%; and by November were around down by 42%. The fund concluded the year with losses exceeding 39%, contrasting with the S&P 500’s gain of nearly 29%.
Following these events, at least nine lawsuits were filed against Melvin alleging conspiracy against retail investors and misrepresentations regarding its involvement; Melvin denied these accusations and all suits were eventually dismissed.
2022
In May 2022, Bloomberg News reported that Melvin Capital intended to wind down its funds and return investor capital by June 30.
Executives
The firm was led by Founder and Chief Investment Officer Gabriel "Gabe" Plotkin. Forbes estimated Plotkin’s earnings at approximately $300 million in 2017, ranking him as the twentieth highest-paid hedge fund manager that year. In December 2020, he acquired two adjacent properties in Florida for $44 million. Plotkin also purchased a minority stake in the Charlotte Hornets from Michael Jordan in 2019 and led a consortium that acquired Jordan’s majority ownership in June 2023.
Bloomberg reported Plotkin earned over $800 million in 2020 but suffered losses amounting to $460 million during January 2021 amid short squeezes. David F. Kurd held the position of Chief Operating Officer (COO) at Melvin Capital.