Boston/London: Wall Street is preparing for another week of market turmoil, and there are signs that the retail frenzy that has caused stock prices for GameStop Corp and AMC Entertainment Holdings Inc to rise is spreading to other assets.
Some of the biggest hedge funds on Wall Street are still licking their wounds as retail traders try to raise the price of heavily bet stocks, causing huge losses to major investors.
Reuters reported on Sunday that Melvin Capital, a hedge fund at the center of GameStop’s plot, lost 53% in January but received new cash promises from investors in the last few days of the month.
A person familiar with the matter said that Melvin had more than $8 billion in assets at the end of January, compared with approximately $12.5 billion at the beginning of the year.
Last Friday, Andrew Left of Citron Research spent two decades building his own brand and became one of the most well-known short sellers in the world. After being strongly opposed by him and others, he refused to publicly detail the company’s shortcomings, and video retailer GameStop’s inventory was not worth the price.
Sunil Krishnan, head of the multi-asset fund, said: “We not only see the powerful capabilities of the new investor base, but also shape the fate of individual stocks, but also shape large-scale companies like Russell 2000. The fate of the market.” At Aviva Investors.
An analysis by Goldman Sachs Group Inc. shows that in the context of violent price fluctuations, the buying and selling positions of US hedge funds last week were the highest since the financial crisis in more than a decade. The investment bank warned that until inventories were still close to record levels.
The investment bank wrote in a report late on Friday: “According to data from Goldman Sachs Prime Minister Services, this week is the largest active hedge fund to lighten up positions since February 2009. Funds within its coverage are sold. Long positions and short positions in various fields.
“Despite aggressive deleveraging, the net worth of hedge funds and total risk exposure by market capitalization are still close to their highest levels on record, indicating that there is a continuing risk of position-driven selling.”
There are growing signs that retail traders who shifted the market last week are looking at more than just US stocks.
On Thursday and Friday, the price of silver rose. Since the social media platform Reddit urged retail investors to flood the market and push up prices, news has spread, with an increase of about 10%. The price of gold has also risen.
Such market trends have made people pay more attention to the growing attention of retail traders to the financial markets, which used to dominate the larger institutions.
Paul O’Connor, head of the multi-asset team at Janus Henderson in London, said: “It’s surprising that the scale of participation in the retail industry has started to expand in recent months.”
“If you look at the data a few months ago, you will find that it is happening. These guys didn’t wake up like they did last week.” O’Connor added.