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.
Short the stonk you get the bonk. Imagine not hedging multiple massive short positions whatsoever and then watching your biggest longs evaporate. Get fucked.
Another one bites the dust. So all the people who raved about Melvin on WSO 2 years ago and hated on Greenlight...
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.
I've certainly seen this over the past weeks. Everyone beating the Tiger, Melvin etc drum.. and now....
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.
probably just move to other places
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.
Apparently liquidation happened before announcement?
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).
This is how it always works to avoid people frontrunning and trading against you.
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.
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.
He was long and levered on overvalued tech stocks, this is all on him having shitty risk management. Isn’t he meant to run a HEDGE fund?
Yeah not sure how you came to that conclusion.
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!
any of u guys think he's gonna start a new fund later down the line?
100%. He's clearly a very talented investor.
Why do you say he is a talented investor? Just curious
I wouldn't be surprised if he does. He's pretty young.
I'd go work for him lol. I'd love to learn how to invest from him.
who's gonna invest in it?
Wait for a bigger blow-up to take the attention of his, and come back after. Pretty typical stuff.
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.
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.
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
Inaccurate - he could have survived the GME thing and that is why Cohen/Griffin backed him after that.
The issue is everything he did afterwards
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.
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.
Bingo
What did you want him to do? Change his HF fee structure to 2 and nothing?
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.
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.
Question is:
With HFs convert to FO after blow up, are they deploying the same strategies?
Because their FO will likely blow up as well?
Do you guys think Gabe is going to sell his stake in the Hornets?
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.
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.
Time for him to start selling some of his Miami mansions
Can’t be a great investor without surviving several bear markets.
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?
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).
I don’t know what those things mean.
I’m not arguing for it, because I think there are obvious flaws to most models, but no matter what risk framework was being used, reasonable or not, what happened in GME broke the model/framework.
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