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Citadel LLC’s Ken Griffin mentioned retail buyers that participated within the meme-stock craze of early 2021 contributed to Melvin Capital’s demise. With tens of hundreds of thousands of households getting pandemic reduction checks in 2020 and 2021, many individuals “took a run on the inventory market,” he mentioned at Bloomberg Intelligence Market Construction convention.
Griffin identified that it is buyers like pension plans that obtained harm when retail buyers determined to place a brief squeeze on GameStop (GME) and different meme shares in an effort to convey down Melvin, Gabe Plotkin’s hedge fund. “So that you mainly helped wipe out the pension plans of lecturers? You be ok with that?” he requested.
“It is not Gabe’s cash you are taking down. You are taking down the cash from a pension plan that belongs to a trainer,” he mentioned. On Thursday, Bloomberg, CNBC and different media retailers reported that Melvin Capital was winding down and would return buyers’ cash. Plotkin had labored at Citadel LLC early in his profession, and Citadel invested cash in Melvin in January 2021 to stabilize the fund after the meme-stock quick squeeze.
A part of the phenomenon was inventory buying and selling for leisure. “There was actually an leisure dimension that got here into play with cash that in some sense simply dropped out of the sky into their wallets…and so they took a run on the inventory market,” Griffin mentioned.
He additionally put into perspective Gabe Plotkin’s resolution to close down hedge fund Melvin Capital. The common hedge fund lives for about three years, Griffin mentioned. “A number of hundred shut down a 12 months and the world goes on.”
As for Plotkin, “Gabe’s was actually an iconic investor over his profession.. over his profession, he actually did an unbelievable job for his buyers, kudos to him.”
“He went via a very powerful run. He selected a choice that labored for him.”
The rise and fall of Melvin Capital — a timeline
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