Key Takeaways
- • Melvin Capital, a $7 billion long-short equity fund managed by Gabe Plotkin, has returned more than 35% through May 2019, substantially outperforming the average hedge fund (5.3%) and broader market (9.8%) year-to-date.
- • Plotkin, a former top portfolio manager at Steve Cohen's SAC Capital, launched Melvin at the end of 2014 with a $200 million seed investment from Cohen and has grown the fund to roughly double its asset base in less than two years despite broader headwinds facing the hedge fund industry.
- • The fund maintains concentrated positions in technology and consumer sectors, with Netflix as its largest holding and significant exposure to Las Vegas Sands and Worldpay, while employing a pronounced short strategy targeting Tesla and mall REITs.
- • Melvin's 35% return represents a dramatic recovery from 2018, when the fund declined 7%, demonstrating both volatility and operational resilience in executing its long-short mandate.
Summary
Melvin Capital has emerged as one of 2019's top-performing hedge funds, delivering returns exceeding 35% through May—a performance that ranks it among the industry's strongest performers during a period when hedge funds have broadly struggled. The $7 billion long-short equity fund, managed by Gabe Plotkin, has significantly outpaced both the average hedge fund return of 5.3% and the broader equity market advance of 9.8% for the same period, according to industry sources.
Plotkin's fund represents a notable success story in the current hedge fund landscape, particularly given the sector's recent challenges. The manager launched Melvin Capital at the end of 2014 with $200 million in seed capital from billionaire investor Steve Cohen, his former employer at SAC Capital, where Plotkin managed a portfolio exceeding $1 billion. The fund's asset growth has accelerated meaningfully, roughly doubling from approximately $3.5 billion in size less than two years prior to the current $7 billion in assets under management.
The fund's 2019 performance stands in sharp contrast to 2018, when Melvin declined 7%, highlighting both the volatility inherent in long-short strategies and the fund's capacity to recalibrate following underperformance. Plotkin's investment approach maintains focus on the technology and consumer sectors that defined his earlier portfolio management tenure under Cohen. Current major holdings include Netflix, Las Vegas Sands, and Worldpay. At the Sohn Investment Conference in New York, Plotkin emphasized his "intense focus" on the short side of the portfolio, identifying Tesla and mall REITs as key bearish positions.
The fund's rapid asset accumulation during a period of industry-wide outflows underscores investor confidence in Plotkin's track record and differentiated strategy. This performance trajectory positions Melvin Capital as a notable outlier in the broader hedge fund space, where elevated fee structures and competitive pressures have driven significant capital redeployment toward alternative managers and passive vehicles.
Plotkin's fund represents a notable success story in the current hedge fund landscape, particularly given the sector's recent challenges. The manager launched Melvin Capital at the end of 2014 with $200 million in seed capital from billionaire investor Steve Cohen, his former employer at SAC Capital, where Plotkin managed a portfolio exceeding $1 billion. The fund's asset growth has accelerated meaningfully, roughly doubling from approximately $3.5 billion in size less than two years prior to the current $7 billion in assets under management.
The fund's 2019 performance stands in sharp contrast to 2018, when Melvin declined 7%, highlighting both the volatility inherent in long-short strategies and the fund's capacity to recalibrate following underperformance. Plotkin's investment approach maintains focus on the technology and consumer sectors that defined his earlier portfolio management tenure under Cohen. Current major holdings include Netflix, Las Vegas Sands, and Worldpay. At the Sohn Investment Conference in New York, Plotkin emphasized his "intense focus" on the short side of the portfolio, identifying Tesla and mall REITs as key bearish positions.
The fund's rapid asset accumulation during a period of industry-wide outflows underscores investor confidence in Plotkin's track record and differentiated strategy. This performance trajectory positions Melvin Capital as a notable outlier in the broader hedge fund space, where elevated fee structures and competitive pressures have driven significant capital redeployment toward alternative managers and passive vehicles.
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