Gamestop Stock – Hedge fund betting on GameStop closes
A London-based hedge fund that suffered losses during the first meme stock rally in January for betting on American retailer GameStop is closing its doors.
According to people familiar with the matter, White Square Capital, run by former Paulson trader Florian Kronawitter (Florian Kronawitter), told investors that after reviewing its business model, it will close its main fund and Return capital.
People familiar with its positioning said that White Square managed about $440 million in assets at its peak, had bet on GameStop, and suffered a double-digit loss in January.
The move marked the first closure of a hedge fund as the so-called meme stocks soared. Retail investors often coordinate their actions on online forums such as Reddit’s r/WallStreetBets, and in some cases deliberately target hedge fund short sellers, pushing GameStop and theater chain AMC again in January and in recent weeks. The price of stocks such as Entertainment. For example, GameStop soared from less than US$20 at the beginning of the year to more than US$480 at the peak of January.
Which resulted in lost heavily Some funds include Melvin Capital, headquartered in the United States, run by Steve Cohen’s protégé Gabe Plotkin, and Light Street Capital, run by Glen Kacher, who worked at Julian Robertson’s Tiger Management.However, these funds are still operating, and shortly after the loss, Melvin received a US$2.75 billion investment Point72 Asset Management from Cohen and Citadel from Ken Griffin.
“The decision to close is related to the belief that the stock long-short model has been challenged,” Cronavitt said.
“There are too many fish in the pond, and the long-short strategy is the same,” he added. “Traditional advantages are disappearing [eroded by other investors], The supply of capital exceeds demand. “
A person close to the fund said that the decision to close has nothing to do with the rebound of meme stock. The person added that the fund quickly rebounded after the turmoil in January and made up for the loss of its “fair share”.
Among other funds that have been hit, Melvin is still Down about 44.7% This year to the end of last month, Light Street has fallen by about 20.1%.
Cronavitt, who worked at the hedge fund of American billionaire John Paulson and Merrill Lynch, achieved double-digit gains in white field in 2015 and 2016. A person who has seen these figures said, Last year’s revenue was approximately 19%.
In an investor letter announcing the closure of the fund, White Square stated that last year, despite the strong performance that year, two large investors chose to withdraw cash and invest it in cheap passive funds or private equity. “We have personally experienced a shift in the trend from hedge fund investments to cheaper alternatives,” it added.
According to this letter, White Square was originally scheduled to receive investor inflows again in May of this year, but decided to close the fund.
“Due to the capital shock caused by the central bank’s currency intervention and the greatly improved information dissemination, arbitrage opportunities have been reduced. This raises the question of how far the same fees can be justified,” it said.