<story><title>Hedge fund Melvin sustains 53% loss after Reddit onslaught</title><url>https://arstechnica.com/gadgets/2021/01/hedge-fund-melvin-sustains-53-loss-after-reddit-onslaught/</url></story><parent_chain><item><author>dcolkitt</author><text>It should be noted that Melvin Capital returned over 50% in 2020[1], 44% in 2019[2], and has averaged above 30% annual returns since inception[3].&lt;p&gt;In other words, even though this is definitely painful, even &lt;i&gt;inclusive&lt;/i&gt; of this event, it&amp;#x27;s one of the best performing hedge funds of the past decade.&lt;p&gt;[1]&lt;a href=&quot;https:&amp;#x2F;&amp;#x2F;www.wsj.com&amp;#x2F;articles&amp;#x2F;citadel-point72-to-invest-2-75-billion-into-melvin-capital-management-11611604340&quot; rel=&quot;nofollow&quot;&gt;https:&amp;#x2F;&amp;#x2F;www.wsj.com&amp;#x2F;articles&amp;#x2F;citadel-point72-to-invest-2-75-...&lt;/a&gt;
[2]&lt;a href=&quot;https:&amp;#x2F;&amp;#x2F;www.bloomberg.com&amp;#x2F;news&amp;#x2F;articles&amp;#x2F;2019-07-19&amp;#x2F;cohen-cub-gabriel-plotkin-sees-fund-surge-about-44-this-year&quot; rel=&quot;nofollow&quot;&gt;https:&amp;#x2F;&amp;#x2F;www.bloomberg.com&amp;#x2F;news&amp;#x2F;articles&amp;#x2F;2019-07-19&amp;#x2F;cohen-cub...&lt;/a&gt;
[3]&lt;a href=&quot;https:&amp;#x2F;&amp;#x2F;www.baltimoresun.com&amp;#x2F;business&amp;#x2F;ct-biz-reddit-wall-street-bets-gamestop-melvin-capital-20210127-qk6uwmw5bze35dmvpx7xbgsyf4-story.html&quot; rel=&quot;nofollow&quot;&gt;https:&amp;#x2F;&amp;#x2F;www.baltimoresun.com&amp;#x2F;business&amp;#x2F;ct-biz-reddit-wall-str...&lt;/a&gt;</text></item></parent_chain><comment><author>runako</author><text>Context is important, so the Nasdaq 100 (as represented by the QQQ ETF) returned ~49% in 2020, 39% in 2019, and 24% over the last 5 years. Beating the indexes by 5-6 points consistently is very good, but it&amp;#x27;s important to keep in mind that most equities were doing really well over that period.&lt;p&gt;(Edit: It&amp;#x27;s been reported elsewhere that these numbers are net of fees. However, it&amp;#x27;s entirely possible that for taxable accounts, tax considerations still narrow the performance gap. And of course, the QQQ offers instant liquidity and did not drop 53% this month.)&lt;p&gt;Either way, the money currently in there is very likely to underperform the indexes over the next 5 years (because they need to return 100% to get back to the pre-GME position).</text></comment>
<story><title>Hedge fund Melvin sustains 53% loss after Reddit onslaught</title><url>https://arstechnica.com/gadgets/2021/01/hedge-fund-melvin-sustains-53-loss-after-reddit-onslaught/</url></story><parent_chain><item><author>dcolkitt</author><text>It should be noted that Melvin Capital returned over 50% in 2020[1], 44% in 2019[2], and has averaged above 30% annual returns since inception[3].&lt;p&gt;In other words, even though this is definitely painful, even &lt;i&gt;inclusive&lt;/i&gt; of this event, it&amp;#x27;s one of the best performing hedge funds of the past decade.&lt;p&gt;[1]&lt;a href=&quot;https:&amp;#x2F;&amp;#x2F;www.wsj.com&amp;#x2F;articles&amp;#x2F;citadel-point72-to-invest-2-75-billion-into-melvin-capital-management-11611604340&quot; rel=&quot;nofollow&quot;&gt;https:&amp;#x2F;&amp;#x2F;www.wsj.com&amp;#x2F;articles&amp;#x2F;citadel-point72-to-invest-2-75-...&lt;/a&gt;
[2]&lt;a href=&quot;https:&amp;#x2F;&amp;#x2F;www.bloomberg.com&amp;#x2F;news&amp;#x2F;articles&amp;#x2F;2019-07-19&amp;#x2F;cohen-cub-gabriel-plotkin-sees-fund-surge-about-44-this-year&quot; rel=&quot;nofollow&quot;&gt;https:&amp;#x2F;&amp;#x2F;www.bloomberg.com&amp;#x2F;news&amp;#x2F;articles&amp;#x2F;2019-07-19&amp;#x2F;cohen-cub...&lt;/a&gt;
[3]&lt;a href=&quot;https:&amp;#x2F;&amp;#x2F;www.baltimoresun.com&amp;#x2F;business&amp;#x2F;ct-biz-reddit-wall-street-bets-gamestop-melvin-capital-20210127-qk6uwmw5bze35dmvpx7xbgsyf4-story.html&quot; rel=&quot;nofollow&quot;&gt;https:&amp;#x2F;&amp;#x2F;www.baltimoresun.com&amp;#x2F;business&amp;#x2F;ct-biz-reddit-wall-str...&lt;/a&gt;</text></item></parent_chain><comment><author>jabberwcky</author><text>It should also be noted Melvin would not have achieved these results without leverage, which is precisely why a single holding almost destroyed the fund. Comparing unlevered benchmark index return to ultra-levered fund return simply doesn&amp;#x27;t work. The S&amp;amp;P most certainly outperformed Melvin on a risk-adjusted basis due to this single drawdown alone.</text></comment>