Melvin Capital and Light Street Capital, two U.S. hedge funds hit hard by a rally in stocks popular with retail investors in January, suffered further losses in May as shares of memes rose again.
Melvin, the most publicized victim of the first meme stock rally in January, lost a further 4% in May, people familiar with the numbers said.
That brings the fund’s losses this year to around 44.7%, the people said. The S&P 500 index of US stocks rose 0.6 percent last month and nearly 12 percent in the first five months of the year.
Hedge fund losses just by betting against five popular memes stocks – GameStop, Bed Bath & Beyond, AMC, BlackBerry and Clover Health – total around $ 6 billion since early May, according to data firm Ortex Analytics. Peter Hillerberg, co-founder of Ortex, said the funds had recently reduced their short positions in meme stocks, but short-term interest remained “at very high levels”.
New York-based Melvin, led by Steve Cohen’s protégé Gabe Plotkin, found himself at the center of the GameStop saga in January. Melvin’s performance fell 53 percent amid a stratospheric rise in the share price.
The fund, which suffered a $ 4.5 billion decline in asset values in January from the end of last year, soon after received a $ 2.75 billion investment from Cohen’s Point72 Asset Management and Ken Griffin’s Citadel.
Melvin’s assets have since grown further to $ 11 billion as of June 1, according to a person close to the company. After the extent of the company’s losses came to light, Melvin said she had abandoned her bet against GameStop and reduced the risk in her investments – although she suffered further losses last month.
Stocks like GameStop, AMC and BlackBerry exploded in late January, as amateur investors coordinating their actions on forums like Reddit, and in some cases directly targeting hedge funds, piled up.
After retreating, these values have risen sharply in recent weeks. The rallies hurt both short sellers betting directly against stocks, as well as managers with short positions in other stocks who were affected by the market volatility that followed or while other sellers overdraft void their bets.
Others who lost money included Light Street Capital, created by Glen Kacher, a so-called Tiger Cub who previously worked at Julian Robertson’s Tiger Management.
The company, which managed around $ 3.3 billion in assets at the start of this year, was hit in the first quarter. Its flagship fund lost another 3% in May and is now down 20.1% this year, according to figures sent to investors. The fund’s losses in the first quarter were mainly due to losses on short selling, said a person familiar with its positioning.
Melvin and Light Street declined to comment.
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