scrapped a plan to start charging performance fees again at his beleaguered hedge fund, Melvin Capital Management, after encountering backlash from investors.
Mr. Plotkin on Thursday told clients he planned to shrink the size of Melvin’s hedge fund by several billion, to $5 billion, and resume charging performance fees even though his investors are still sitting on steep losses. Those who had been invested at the start of 2021 have lost 51.8% through March, after a big hit Melvin suffered in January of last year due to the meme-stock rally.
While Melvin planned to charge reduced incentive fees for 30 months and Mr. Plotkin had also laid out a set of investor-friendly changes, his move to buck the industry standard of holding off on charging performance fees until he had made clients whole generated surprise and criticism from some of his investors, as well as other industry participants.
“I am sorry. I got this one wrong. I made a mistake. I apologize,” Mr. Plotkin wrote in a Sunday message to investors that was viewed by The Wall Street Journal. His reversal was earlier reported by the New York Post.
He said Melvin would take two to three weeks to reassess in light of the feedback it had received before coming back with another proposal, despite enough sign-on from investors to move forward with his original restructuring plan.
“Some of you feel that we were not being a good partner. Upon reflection, you are right,” he wrote.
Mr. Plotkin said he had been too focused on retaining his team and the favorable reaction of several investors Melvin had had initial conversations with to realize his plans were “tone deaf.”
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Appeared in the April 25, 2022, print edition as ‘Fund Halts Fee Plan, Pressed by Backlash.’