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From the headline coverage, the options trading is made out to be a Main Street vs Wall Street phenomenon: or even sensationalized to average Joe vs banksters.

But it seems that the hedge fund keeps a low profile: Plotkin doesn't go on the air to the extent of Dalio or Ackman. Moreover, with an institutional client-base of mostly endowments and charities, it seems Melvin Capital is mostly managing assets that are explicitly for goodwill and higher education. Their website is rather basic; I couldn't find a detailed AUM breakdown for how much is philanthropic capital.

I'm sure all the fine print is in order when an asset owner mandates out to a hedge fund, but surely there is a moral component to this.

Question

Essentially my question boils down to: if it's public knowledge that this hedge fund is managing a large amount of philanthropic capital, are investors on the other side of the trade acting as barriers/exploiters of the goodwill?

Arash Howaida
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Notwithstanding the activity over the last weeks, do you think Melvin as an entity, Plotkin, Ackman, Dalio, or the great Buff man care who specifically is on the other end of a trade, ever? Have you ever cared about whether the share you just bought was sold to you by a nearly destitute widow about to be out of money? You have no fiduciary duty over Melvin's fund. By just about any measure Melvin took a pretty rational position against GameStop, but was too aggressive in scale and hedging.

There have been short squeezes before and there will be others in the future. As far as I'm concerned the sensationalization of this one by the media is criminal. The people involved are in it to make money, you've got to be kidding yourself if you think there was no institutional money also adding fuel to the fire on the buy side of last week. I don't buy for one second that all of this materialized by small retail traders.

The real moral of the story here is that no one is sticking it to the "banksters" by buying a $2 company for $300. A lot of greedy fools are being separated from their money. And some of the greedy fools will live to lose their gainz another day.

Whatever happens to a hedge fund and its investors' money isn't your concern. Hedge fund investors were there for a high risk high reward strategy. Investment advisers who bring their funds to a hedge fund may have some explaining to do when the strategy goes sideways like it did here. I'm sure there will be congressional hearings and lawsuits about whatever institutional "safeguards" were ignored, skirted or failed.

Separately, short selling isn't some immoral endeavor just because Elon Musk complains on Twotter when people question Tesla's valuation (incidentally there have been a number of short squeezes in Tesla's history). You better believe Elon isn't going to bail out any of the GameStonk crusaders when the music stops on this one, neither would Melvin's "Goodwill" clients or whoever else you think was on the other side of any of your trades.

quid
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No

are investors on the other side of the trade acting as barriers/exploiters of the goodwill?

Nobody is trying to squeeze GME because they think charities are easy targets or some sort of nefarious purpose. Now, if certain charities have placed funds into hedge funds that undertake risky trades, that's entirely an issue between those charities and their hedge funds. It is not the responsibility of other traders to try and protect a hedge fund from poorly placed trades - not only is that not profitable, but it would distort the market.

NPSF3000
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