Melvin shutting down

All hail the biggest clown on the street Gabe Plotkin

From Bbg:

"The past 17 months has been an incredibly trying time for the firm and you, our investors," founder Gabe Plotkin wrote. "I have given everything I could, but more recently that has not been enough to deliver the returns you should expect. I now recognize that I need to step away from managing external capital."

After giving up on your investors, now you can manage your family office, aka the fees you scammed from them.

Comments (68)

May 18, 2022 - 5:26pm
PrivateTechquity 🚀GME🚀, what's your opinion? Comment below:

Short the stonk you get the bonk. Imagine not hedging multiple massive short positions whatsoever and then watching your biggest longs evaporate. Get fucked. 

  • Prospect in HF - EquityHedge
May 18, 2022 - 8:17pm

hahahaha now greenlight is up double digits and they're down double digits. I guess having granular models with hundreds of lines doesn't dig you out of the hole of piss poor risk management. 

May 18, 2022 - 5:51pm
Pizz, what's your opinion? Comment below:

Does anyone at WSO actually work at Melvin or knows anyone who works there? Just curious to know what you're/they're going to do next. 

  • Prospect in IB-M&A
May 18, 2022 - 7:15pm

Yeah, whole thing is nuts. Would like to hear what the last day was like -- was it today? Did he gather everyone together to break the news before it went public? Must have been super strange. 

  • Prospect in IB-M&A
May 18, 2022 - 7:53pm

Wait, how can you tell from this? (Print's kind of small). 

But hey, at least he was diversified (but as a final insult, his Bath and Body Works was down 6% after hours).  

May 18, 2022 - 8:34pm
hominem, what's your opinion? Comment below:

I totally agree and found this quite disappointing as well. 

When Melvin was doing well, everyone talked about what a great person Gabe was and how generous he was. But when he hit a rough patch, he literally tried screwing over his investors and then abandoned them at the darkest moment leaving them in the lurch to nurse their losses. 

In his last email to his investors, he wrote: "I try to teach my kids that everyone makes mistakes, but ultimately it is about how you handle them. Accountability is critical." 

I don't know know how Gabe defines "accountability", but losing his investors a bunch of money, enriching himself at their expense, and then abandoning them is not exactly how I would define it. Gabe is clearly a talented investor -- he just got caught up in really bad stuff last year (and, while he's doing poorly this year, there are plenty of equally reputable HFs that are doing far worse) -- and his investors clearly still believe in him. You'd think that he'd want to work his damnedest to get out of this situation for his investors. But he just doesn't want to because he just doesn't care. 

That said, I am speculating a lot. But from the outside looking in, this just does not look great. I really do wish there was someone on here who has a friend at Melvin who could give us the scoop...

  • Associate 2 in HF - RelVal
May 18, 2022 - 8:44pm
hominem

I totally agree and found this quite disappointing as well. 

When Melvin was doing well, everyone talked about what a great person Gabe was and how generous he was. But when he hit a rough patch, he literally tried screwing over his investors and then abandoned them at the darkest moment leaving them in the lurch to nurse their losses. 

In his last email to his investors, he wrote: "I try to teach my kids that everyone makes mistakes, but ultimately it is about how you handle them. Accountability is critical." 

I don't know know how Gabe defines "accountability", but losing his investors a bunch of money, enriching himself at their expense, and then abandoning them is not exactly how I would define it. Gabe is clearly a talented investor -- he just got caught up in really bad stuff last year (and, while he's doing poorly this year, there are plenty of equally reputable HFs that are doing far worse) -- and his investors clearly still believe in him. You'd think that he'd want to work his damnedest to get out of this situation for his investors. But he just doesn't want to because he just doesn't care. 

That said, I am speculating a lot. But from the outside looking in, this just does not look great. I really do wish there was someone on here who has a friend at Melvin who could give us the scoop...

I am informed he basically was met with such surfeit redemption requests that he decided instead to just wind down to save face.

Funniest
May 18, 2022 - 10:50pm
Kevin25, what's your opinion? Comment below:

I mean what else can he do. He shorted overvalued company, but the whole world united against him and killed his fund, now nobody will trust him with money anymore. So all you can do is just retire and go do something else.

May 20, 2022 - 11:03am
CuriousCharacter, what's your opinion? Comment below:
hominem

Gabe is clearly a talented investor 

Yeah not sure how you came to that conclusion.

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Jun 9, 2022 - 11:56am
CuriousCharacter, what's your opinion? Comment below:

Who's throwing monkey shit?

In my book, talented investors *make money* for their LP's, they don't blow up their fund on the most obvious short squeeze in two decades, and they don't have to beg daddy war bucks for a bailout to keep operating (and then STILL have to shut down a few months later! ahahahahahah)

But to each their own I suppose!

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  • Prospect in IB - Gen
May 18, 2022 - 9:04pm

any of u guys think he's gonna start a new fund later down the line?

  • PM in HF - Other
May 18, 2022 - 10:03pm

Looking at his positions towards the last year it stands out as "market bully" vs "talent" I would say. People on here deem 1 year returns or so with "talent" then ridicule them to death when things go awry. In reality those kinds of positions are not put on unless you are pretty damn certain you can submit the market to your view. 

May 19, 2022 - 10:10am
rumplestiltskin, what's your opinion? Comment below:

How can you call him a talented investor if he couldn't make it through QT?  Dude had one theme and no risk management.

The great investors can make money and change their style in nearly any environment without blowing up.  Making more a couple of years just because they took more risk a la Tiger is just moral hazard and it's the investors fault for allowing it.

Controversial
  • Analyst 3+ in HF - Other
May 19, 2022 - 11:59am

I honestly feel bad for Gabe. Only know of people of people that worked for him and when things were going great, everyone said great things about him. I don't think he's better or worse than any of these tiger cubs. He really just fucked up once with GME and became the face for retail traders to hate on. Honestly - who would've seen GME coming? Everyone knew that was a one off. That's why P72 and Griffin bailed him out. But as luck would have it, he got caught up in the tech sell off this year as well. I can't imagine how fcking burnt out the guy must feel when the whole world hates him. I agree though that his risk management was shit when it came to GME. But that was one isolated black swan event. If GME never happened and he was down like all these other tech funds this yr, I doubt he'd be closing his fund. But everyone's lost faith in him because why put your money with him when you can put it somewhere else. Guy is tainted. I hope he takes a break and comes back a rockstar investor with real alpha. But we'll see. After all, he doesn't need to give a fck. He'll be fine. But if he does - I might genuinely have some respect for him

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  • Analyst 3+ in HF - Other
May 19, 2022 - 1:33pm

I totally agree he could've survived GME if he started making money again. But it's an awful environment for people in his strategy - I mean look at every tiger cub. They're not shutting down right? My point was that GME is the primary reason he's tarnished and is shutting down. All these other funds are doing shit this year and they'll still survive. Redemptions sure, but not shutting down. 

  • Associate 2 in HF - RelVal
May 19, 2022 - 6:15pm

I honestly feel bad for Gabe. Only know of people of people that worked for him and when things were going great, everyone said great things about him. I don't think he's better or worse than any of these tiger cubs. He really just fucked up once with GME and became the face for retail traders to hate on. Honestly - who would've seen GME coming? Everyone knew that was a one off. That's why P72 and Griffin bailed him out. But as luck would have it, he got caught up in the tech sell off this year as well. I can't imagine how fcking burnt out the guy must feel when the whole world hates him. I agree though that his risk management was shit when it came to GME. But that was one isolated black swan event. If GME never happened and he was down like all these other tech funds this yr, I doubt he'd be closing his fund. But everyone's lost faith in him because why put your money with him when you can put it somewhere else. Guy is tainted. I hope he takes a break and comes back a rockstar investor with real alpha. But we'll see. After all, he doesn't need to give a fck. He'll be fine. But if he does - I might genuinely have some respect for him

You are missing the point. You can lose money as a net long in a de-risking environment and still not get redeemed. But you cannot lose 50% and then try to charge performance fees before HWM and expect to continue managing money. He is greedy and does not protect capital before his own paychecks. That is why he is gone.

Most Helpful
May 19, 2022 - 6:28pm
Anchor, what's your opinion? Comment below:

I'm sure he was a great guy, really smart and probably a good analyst. But look at the tape - I'm amazed at people saying funds down 50%+ are still great investors who got unlucky or whatever. They're shit investors, it was just risk/beta on the way up and down. If you lose 50% you're a bad hedge fund manager. You have 1 job. To not do that. If you do that you're bad at the job. 

  • PM in HF - Other
May 19, 2022 - 6:34pm

Man seriously do not get people saying this dude is so talented. Its pretty clear his strategy and positions are market bully where he knows he can drive the narrative. To see no one saw GME coming, look at herbalife. The guy literally had crazy risk on cause he knew he could drive them to bankruptcy. Then when things went awry he kept to high beta and went more long allocated overall. These are actions of someone who just thinks they muscle things back right vs saying okay over 5 years lets make it back.

May 20, 2022 - 8:30am
falconeagle, what's your opinion? Comment below:

Completely agree with other posters above who say how can this guy be considered a good investor, in light of his performance the last 2 years? So when markets are really buoyant he's "a genius" but when there's a prolonged selloff it's the market's fault?

Admittedly I'm an IB/PE guy so never worked in the HF industry, but guys like Plotkin and Chase Coleman/Tiger just make me skeptical of a lot of the industry. There has been a prolonged market selloff admittedly - but if Melvin/Tiger's performance is just equivalent to a leveraged QQQ fund (eg TQQQ) ie outperforming in the good times but then underperforming significantly in the bad times - why would investors be paying these guys management fees?

Clearly there are great HFs out there. But I don't see how people can say Melvin or Tiger are among them - I'm sure they have tons of smart guys working there, but all their combined stockpicking efforts have given investors a similar return to TQQQ lol.

  • Investment Manager in HF - Other
May 20, 2022 - 8:51am

I agree with this, and I also find it humorous how short term of a memory people have (on this site, some of the press, etc). That and the selective sh*ting of firms based on current conditions. All the praise for the high flying funds and crapping on funds that "can't beat the market" without mentioning the 10yr bull run then realizing that some of those firms were actually just managing their risk (because no one gets it perfect, yes would be nice to be all in on good times and get out at bad times…). It is not possible to generate 40%+ returns without taking on some serious volatility, and if you do that without a great risk management process this is going to happen. The great firms manage risk just as thoroughly as they manage their alpha. 

May 21, 2022 - 11:06am
Premia, what's your opinion? Comment below:

Can't be a great investor without surviving several bear markets.

Array
May 21, 2022 - 12:08pm
HFPM, what's your opinion? Comment below:

I agree with some of what is written.

1) Great investors make money in all types of markets. That is one of the best tests of capability / staying power. 
 

2) what happened at Melvin was not a bear market. It was idiosyncratic. Was it possible to identify it ex ante or respond better when it was ongoing? Quite likely. But it wasn't a bear market and it could have happened to a stock I was short or anyone else was short. It was a new risk factor which came out of left field and could have clipped anyone. 

3) is it complete BS that he got paid $$$$ and then lost a bunch of money and shut down? f yes, it is. That's what gives our industry a bad reputation. If we believe in what we are selling we should have significant fee clawbacks instead of high water marks. And by the way, many PMs operate under risk of clawback for future losses so why don't GPs too?

May 28, 2022 - 11:18pm
mlroxx, what's your opinion? Comment below:

There are always some new "risk factors" coming into play. That is why risk management like position sizings and hedging exists. At the end of the day, what differentiates a professional from a gambler is that the former is obligated to play within his/her risk parameters. 

Gabe in the GME case was basically "investing" like an "autist" on r/wsb. No surprises that he ended up with similar results (otherwise known as loss pr0n).  

May 21, 2022 - 5:01pm
fcfyield, what's your opinion? Comment below:

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Jun 1, 2022 - 12:27pm
prospect9999999999, what's your opinion? Comment below:

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