(Reuters) - Melvin Capital Management is planning to shrink to $5 billion from the $8.7 billion it managed at the end of March, aiming to become more nimble to seek better returns, said a source familiar with the matter.
Melvin, which lost nearly $7 billion early last year by betting on stocks like GameStop (NYSE:GME) would tumble, is targeting a size of between $4.5 billion-$5 billion and told investors that its maximum total assets under management should remain between $6.5 billion and $7 billion until June 2027, when this threshold could be changed, the source said.
To remain within this limit, Melvin intends to return capital to investors every time it reaches $7 billion for more than 90 consecutive days, according to the source who did not want to be identified because the discussions are private.
Gabe Plotkin, the founder of Melvin, had been betting since 2014 that GameStop shares would tumble as the world shifts away from the brick-and-mortar video retailer's offerings.
But retail investors banded together to support GameStop, sending it surging more than 2,500% in January 2021. By the end of the month, Plotkin had closed the short position on the so-called meme stock, but the hedge fund lost 39% last year.
Melvin intends to charge fees ranging from 15% to 25% under this new structure, down from its previous performance fee of 20% to 30%, the source said.
The Wall Street Journal and CNBC reported earlier on the fund's restructuring.