Greenlight Capital Re Ltd., the reinsurer that counts hedge-fund manager David Einhorn as its chairman, cut an investment in gold in the three months ended June 30 as prices fell into a bear market.
The reinsurer had about $50.5 million of commodities at the end of the second quarter, compared with $90.3 million on March 31, according to a regulatory filing yesterday. The cost basis for the investments fell to $41.8 million from $59.9 million in the period, the Cayman Islands-based company said.
The “decrease in commodities was due to a decline in the price of gold combined with the disposal of a portion of our physical gold holdings,” according to the filing.
Gold futures dropped 23 percent last quarter, the most since Bloomberg data begins in 1975, and reached $1,179.40 an ounce on June 28, the lowest since August 2010. The metal remains in a bear market reached in April after some investors lost faith in bullion as a store of value and amid speculation that the Federal Reserve will curb its stimulus program. Goldman Sachs Group Inc. forecast July 22 that prices are likely to decline further.
About 90 percent of Greenlight Capital Re’s $1.01 billion of investments backing policyholder liabilities was in stocks at the end of June, according to the filing. Einhorn, 44, who oversees the portfolio, has said the bet on gold was a hedge against currency devaluation as central banks around the world have worked to stimulate the economy by buying bonds and keeping interest rates low.
The stock market’s “rapid advance is creating a potentially unstable condition which could resolve a number of ways and is difficult to predict,” the reinsurer said. The company plans “to continue holding a combination of a significant position in gold, macro positions in the form of options on higher interest rates and foreign exchange rates, short positions in sovereign debt and sovereign credit default swaps.”
Brian Ruby, a spokesman with ICR Inc. who represents Greenlight Capital, had no immediate comment on when the reinsurer sold its holdings.