One of Steve Cohen’s top investments in December could be his former protege.
Gabe Plotkin, who has worked for the billionaire for eight years, told insiders that his hedge fund Melvin Capital Administration was up about 44% rapidly in the first half of the year. Cohen’s $14 billion hedge fund, Point72 Asset Management, has invested about $1 billion in Plotkin.
Plotkin, 40, manages about half of its former boss’ cash but has outperformed Point72 by several times in 2019. Cohen’s institution, which relies on several groups of businessmen speculating in very different ways, returned 9.2 percent in the 12 months to June this year, Bloomberg reported earlier this month.
Cohen’s blessing and financial backing
New York-based Melvin, a division of Plotkin’s $7 billion long-short hedge fund, has lost money in 2018, but it has made big sales since launching in December 2014 with Cohen’s blessing and financial backing. Melvin grew from 47 percent in 2015 to about 40 percent in 2017, ranking second in Bloomberg’s international assessment of the top 50 hedge funds with $1 billion or more in assets. The agency’s defenders declined to comment.
Overall hedge fund activity got off to its best start in a decade, rising 5.7 percent in the first half, with most of the growth coming from hedge funds, according to Hedge Fund Analysis Inc. The S&P 500, when dividends are reinvested, rose about 19% during that period.
Plotkin, who worked at Cohen’s predecessor, SAC Capital Advisors, from 2006 to 2014, had a very different approach to trading than his former boss. While Cohen was an aggressive trader who bet heavily on relatively short-term positions, Plotkin’s investments were based on careful analysis and self-discipline.
Sohn Money Conference
At the Sohn Money Conference in New York in March, Plotkin described Melvin as “a really human place. We have a number of analysts, and we hold them to high standards,” he said. The staff has built models of the “critical elements” of more than 500 companies, and a team of knowledge science experts interprets their characteristics.
He said the agency was “heavily focused” on the front end, with about 70 percent of Melvin’s profits in the first 12 months coming from bearish bets. Plotkin is skeptical of the shopping center finance trust and electric car maker Tesla Inc.
“I have my own reasons for trying to make money on all the names in my portfolio, not just half of them,” he said.
By December of this year, according to a person familiar with the matter, Melvin was making money on his fast positions despite a strong rally in the fair market.
As of March 31, Melvin’s top U.S. holdings were Netflix Inc, Las Vegas Sands Corp. and money transfer processor Worldpay Inc. In the 12 months prior to Thursday, these stocks returned 22%, 27% and 74%, respectively.