In a letter to investors that was reviewed by The Wall Street Journal, Gabe Plotkin, Melvin’s founder, disclosed the winding down of the funds, saying, “The past 17 months has been an incredibly trying time.”
Melvin had been, until last year, one of the top-performing hedge funds in the industry.
Its executives as recently as last week had been soliciting clients for their thoughts on what new fee arrangements seemed fair to them and to Melvin going forward. Plotkin had previously tried to do away with Melvin’s so-called high-water mark, a standard industry arrangement in which hedge funds don’t collect performance fees until their clients are made whole from prior investment losses. The proposal met with resistance from many of Melvin’s clients, and Plotkin withdrew that plan and apologized to investors.
While Melvin made up some of its huge January 2021 losses from the rally in GameStop Corp.
and other so-called meme stocks, its focus on fast-growing companies dealt it further setbacks this year as investors soured on such stocks and its losses widened. This year through April, Melvin had lost 23%. Since its start, it has averaged an 11.9% return.
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