Thoughts on Melvin Capital

There doesn't seem to be a lot of information on them. Any insights into their interview process? How would you compare an offer from Melvin Capital to Point72 or Citadel GE? What would be the pay discrepancy at a junior level?

Any thoughts on working there (culture, stress, hours worked, etc.)? Gabe Plotkin described the firm as very human-intensive, requiring a lot out of analysts (link). Do juniors essentially just build out models or do they contribute to the analysis and idea generation too?

Any information would be greatly appreciated.

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Comments (141)

Jun 14, 2020 - 10:20pm

Know a few people that work there. They have been one of the best performing funds on the street over the past few years and pay is top notch.

Analysts there get paid over $1MM in a good year (years where they have returend 40%+). Varies widely depending on the year's performance.

That said, no work/life balance. expect to work seven days a week for a long time. Tons of people have burnt out from working there.

  • Associate 2 in HF - Other
Jun 20, 2020 - 3:28am

damn $1MM+ comp during a 40%+ year seems kinda low at a $10bn+ fund approaching $500mm AUM per IP. Melvin's generating around ~$800mm in performance fees in that case and has only 25 IPs. seems stingy to not give senior analysts closer to 8 figures in that case BUT if there's nowhere else better for the analysts to go for comp then market is market and there's no need for Gabe to pay nearly as much as he could. life must be good at the top with that equity resid.

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  • Principal in PE - LBOs
Dec 8, 2020 - 11:44am

Why would anyone pay an analyst eight figures, just because there's a huge bonus pool?  Do you tip your cab driver $80 and pay your cleaning lady $500 an hour, just because you had a great year?  In the HF game, you get paid to add value.  If you don't add value in a great year, you'll get paid well and that's about it.  But generally speaking, you dont get paid $10 million or more just for showing up.

Jun 20, 2020 - 1:58pm

Pay obscenely well but as said, the hours are brutal. My understanding is they have an official 6 day work week. Don't confuse banking hours with hedge fund hours either - banking hours are mostly spent fucking around, hedge fund hours are spent doing real work - just means the mental toll is much worse.

  • Associate 1 in HF - EquityHedge
Jun 20, 2020 - 2:15pm

The Melvin analysts are super intensive model monkeys. They cover a large universe of names and have detailed models for all of them that they constantly update. There's obviously great exposure to top investors, but the reason the hours suck (early on) is the amount of modeling.

  • Research Analyst in HF - Other
Jul 7, 2021 - 1:19pm

Are the models significantly more detailed than sellside models? Like is there a big effort in the amount of guesswork/granularity in estimating KPIs and detailed financial items that aren't given by the company in order to more accurately model projections?

  • Intern in S&T - Other
Jun 21, 2020 - 7:23pm

What is the best way to break into Melvin Capital? IB or ER? Is a major in STEM necessary because of the tech focus?

Controversial
  • Analyst 3+ in HF - Other
Jun 22, 2020 - 4:52pm

My guess (and this is completely a shot in the dark) is that they are running a concentrated book with high vol. Usually streaks like these don't end well, see Ackman, Bill

Honestly would be shocked if he's paying his analysts 1mm+. Hedge fund guys are greedy bastards and they will pay you just enough to stay in your current seat. No one on the street is going to pay one of his recent grad analysts 1mm to leave, so he's probably paying them in the mid 6 figures and pocketing the majority of the fees.

  • Associate 1 in HF - EquityHedge
Jun 22, 2020 - 5:26pm

It's not super concentrated, but it's high exposure to tech equities. $1M is the number I heard from current analyst, but don't know him well enough to say he wasn't inflating the number.

Nov 29, 2020 - 3:03am

Analyst meaning junior employee out of banking or PE? If so that is a crazy number.

  • Analyst 1 in ER
Nov 29, 2020 - 11:56am

It is a firm that went from $1bn to $10bn+ aum over the course of a cycle with top bracket returns, a very heavy work schedule, and low turnover

If you look at the combination of those variables, that comp figure is not surprising (especially considering the founder has become a billionaire over this past cycle). If the top guy is making well into 9 figures and is focused on training his team really well (which they do) then you need to pay junior employees higher than the ~$600k other firms will throw at them

By the way, they are much more of a consumer firm than a tech firm

  • PM in HF - RelVal
Jan 25, 2021 - 9:10pm

Lol this comment was spot on - all of you idiot monkeys giving sht for a very prescient comment

  • Associate 3 in HF - EquityHedge
Jan 26, 2021 - 10:26am

You think some of them are going to quit now and hop to another shop? Down 30% at the start of year = 11 more months of grinding 6 day work weeks for probably not much bonus. 

  • Analyst 2 in HF - EquityHedge
Jan 26, 2021 - 12:17pm

Answer is yes for a typical firm and that is how 30% can sink an entire fund in short order. But in this case I suspect they have some solutions in place (hence the 2.7bn funding)  

Jan 26, 2021 - 12:46pm

They have $200mm in management fee whether they make or lose money. You dont think thats enough to pay a what, 10-person investment team?

Gabe doesn't need the money and will obviously pay people even out of his own pocket if needed so he can keep the business running. Everyone chill.

Jan 26, 2021 - 12:43pm

As more details come out this is quickly becoming one of the most interesting and entertaining fund blowup of all time.  Simply amazing.  Should be a movie.

Array
  • Intern in IB-M&A
Jan 26, 2021 - 2:37pm

And remember, they were down 30 percent on Friday, when the stock was 65; it's now at 115, so who knows how much more they lost. Then again, I wonder if they hedged their short by going long on some Friday afternoon or Monday. 

  • Intern in IB-M&A
Jan 26, 2021 - 4:04pm

Yeah, would be interested to know. But as a confident trader, do you really think Plotkin -- when he saw the stock appreciate 50-100% in one day -- is gonna cover, or instead is going to think, "Well, it was up a crazy amount today... so it's gonna be down a crazy amount tomorrow and I don't wanna miss that move." I would think the latter.  

Jan 27, 2021 - 3:22pm

According to this they avoided today's move

https://www.cnbc.com/2021/01/27/hedge-fund-targeted-by-reddit-board-mel…

  • Melvin Capital closed out its short position in GameStop on Tuesday afternoon after taking a huge loss, the hedge fund's manager told CNBC.
  • CNBC could not confirm the amount of losses the firm took on the short position. Citadel and Point72 have infused close to $3 billion into Melvin Capital to shore up its finances.
  • Melvin manager Gabe Plotkin told Andrew Ross Sorkin that speculation about a bankruptcy filing is false.
  • Intern in PE - Growth
Jan 28, 2021 - 2:15am

If they were indeed lying when they broadcasted that they were out of the stock, will there be any repercussions from regulators?

  • Intern in IB - Gen
Jan 28, 2021 - 1:06am

Yeah, the sheer volume would shoot it through the roof. I guess they're legit just lying now? 

  • Intern in PE - Growth
Jan 27, 2021 - 5:40pm

Can someone explain why Melvin needed a bailout / capital infusion? I've read reporting that Melvin was only short via going long puts, in which case their losses would be capped, no?

Most Helpful
Jan 28, 2021 - 2:08pm

You know, I've spent some significant time as of late spewing nonsense with knuckleheads whom have little to no real-life experience in finance. How did I forget the Oasis? A much more productive way to utter my thoughts.

That said, and I open this up for discussion, there's no way IMO Melvin has covered their position. The SI to float was still > 100% as of 1/27. So, that begs the question; why did citadel/p72 lend them $2.75b? Why would you lend that much capital to a fund who is, apparently, still in the trade that blew them up? Why would they be so adamant in helping a competitor (I know he's Stevies protégé)? Well, let's think. It's well known the top players tend to herd the same trades. Why? Because no one wants to be the the one who underperformed. So, presumably, citadel is in a handful of names that Melvin is long. In order for Melvin to fund their margin call, they would've likely began selling their most liquid stocks (think FAANG), which would've likely forced a domino effect of liquidation as shops, like citadel, followed suit. If that's the case, and it may very well not be, I'd certainly be worried when Melvin is actually forced to cover their position.

Jan 28, 2021 - 3:00pm

fyi - BBG's SI numbers are on a significant lag.

Big4 Audit --> TMT L/S

  • Intern in PE - Growth
Jan 28, 2021 - 3:44pm

Andrew Ross Sorkin reported yesterday after a phone call with Plotkin that Melvin "closed out of their short." In this case, you think that was a lie?

  • Analyst 3+ in HF - EquityHedge
Jan 28, 2021 - 4:03pm

GME has traded an absurd amount of $s and shares (> 100% of mkt cap) each of the last few days. Liquidity has not been prohibitive to closing out a short position, even one of whatever Melvin's size may have been. Am sure plenty of new shorts have come in.

  • Analyst 1 in HF - Other
Jan 28, 2021 - 9:56pm

You're right that they funded them to make sure they made their margin call, but part of that was almost definitely so that they could de-lever and unwind in any orderly fashion. If they are margin called they would get force sold out of everything, whereas with the capital injection they could unwind their positions in an orderly fashion. Them selling down $20 billion of securities across the board over a few days isn't going to feedback loop tank the market. Yes they wanted an orderly unwind, yes they almost definitely got out of the short.

  • Partner in HF - Other
Jan 29, 2021 - 12:35am

Melvin is toast, down 70 plus. Still unwinding. Looking at liquidity of the long book 1/3 was one day1/3 was 5 days 1/3 was a month ish.

The capital was to buy time, freezing out retail was to buy time. We aren't over yet, it's just a question of does it stay an intra mkt l/s problem, or the entire mkt problem. Primes think they have a fence around it. We shall see.

  • Partner in HF - Other
Jan 29, 2021 - 12:35am

Melvin is toast, down 70 plus. Still unwinding. Looking at liquidity of the long book 1/3 was one day1/3 was 5 days 1/3 was a month ish.

The capital was to buy time, freezing out retail was to buy time. We aren't over yet, it's just a question of does it stay an intra mkt l/s problem, or the entire mkt problem. Primes think they have a fence around it. We shall see.

Jan 29, 2021 - 7:01am

Melvin Capital might actually be finished. They probably lied about covering, and there is still a short interest of over 100%, while the price has risen to 400$. The market manipulation attempt also backfired, which can cause the price to skyrocket even more, once trading GME is allowed again.

Given all of the circumstances, this might be "good" for the Biden Administration that promised to be more tough on white collar crime. 

  • Intern in PE - Growth
Jan 29, 2021 - 7:47pm

Don't know much about shorting, but the still-high short interest can be from a brand new slate of funds that went short at say, $350, right? With Melvin being completely out, per CNBC's reporting.

  • Prospect in IB - Gen
Jan 29, 2021 - 7:05am

Surely investors will start trying to pull funds too at this point? Especially given their management of the situation.

  • Intern in IB-M&A
Jan 30, 2021 - 4:20pm

Biggest question is -- did OP take the offer he got from Melvin Capital this past June?  

Jan 30, 2021 - 6:21pm

Any ideas how they lost so much? Long puts should be limited to premium lost. Short stock (5.4 million shares) couldn't have caused a 30% drawdown by Friday when GME was only up $48 on the year, which equates to a $258mil loss. I know their other shorts got hammered too, but down $4bn on Friday the 22nd before the really major moves is out of this world. My guess is they sold calls to fund the long puts, and option sales aren't subject to 13F reporting so we don't know about that side? It's fairly common to sell options to fund option purchases, especially if they've been bearish GME for a long time and have to keep paying premium to roll the put options.

  • 3
  • Partner in HF - Other
Jan 30, 2021 - 7:42pm

The whole short book ripped hard, not just gme. Big shorts and puts in bbby and several several other names... and there longs got crushed as all the funds de levered. Crowded trades and leverage, that will always get ya...

Normally when this happens like in quant 2007 if you can hold out through the drop and not de lever / unwind you will catch the reversal on the other side and be almost flat.
So when it's happening you do every you can not to sell / cover, but here it wasn't enough.

Feb 2, 2021 - 9:37am

The 5.4million shares is 10% of float. I recall seeing some of the earlier reddit long theses on GME, and they cited Melvin's short sales and put exposure. It's possible they conflated the 2, which is where I got the number. 5.4million shares is also a little bit more than 10% of float...not that they're great risk managers, but even a relatively poor risk manager would know to not be short too much of float? 

  • 1
Feb 2, 2021 - 9:36am

The 5.4million shares is 10% of float. I recall seeing some of the earlier reddit long theses on GME, and they cited Melvin's short sales and put exposure. It's possible they conflated the 2, which is where I got the number. 5.4million shares is also a little bit more than 10% of float...not that they're great risk managers, but even a relatively poor risk manager would know to not be short too much of float? 

  • 1
Feb 18, 2021 - 6:38pm

If Gabe didn't go to a semi-target and wasn't Jewish, there is no way he gets a job at SAC and break into the buyside. Listening to him is painful and he clearly isn't all that eloquent. Imagine listening to him pitch an investment thesis. 

Roaring Kitty has much more clarity in his presentation and thesis construction. Roaring Kitty didn't attend a target however but clearly you can tell if the dude did attend a target he would've carved out a decent buyside career. 

Feb 19, 2021 - 10:26pm

voetbalwizard

If Gabe didn't go to a semi-target and wasn't Jewish, there is no way he gets a job at SAC and break into the buyside. Listening to him is painful and he clearly isn't all that eloquent. Imagine listening to him pitch an investment thesis. 

Roaring Kitty has much more clarity in his presentation and thesis construction. Roaring Kitty didn't attend a target however but clearly you can tell if the dude did attend a target he would've carved out a decent buyside career. 

I'm sorry, is this wildly anti-Semitic comment just going to remain on the site without moderation? Seriously?

  • Analyst 1 in IB-M&A
Apr 12, 2021 - 12:49am

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