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Einhorn's Greenlight Pares 2019 Surge With 1.4% Loss in May

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Einhorn's Greenlight Pares 2019 Surge With 1.4% Loss in May

  • Main hedge fund is still beating peers and market this year
  • Greenlight had its worst year on record in 2018 with 34% drop
David Einhorn
David Einhorn Photographer: Alex Flynn/Bloomberg
David Einhorn
Photographer: Alex Flynn/Bloomberg

Greenlight Capital, the hedge fund firm led by David Einhorn, fell 1.4% in May, paring a rebound from its worst year ever.

Greenlight’s main fund, which plunged 34% in 2018, is now up 17% this year, according to an investor update seen by Bloomberg. Einhorn’s value-investing strategy is beating peers and the S&P 500 Index, which has rallied about 11% this year with reinvested dividends. The HFRX Global Hedge Fund Index, an early indicator of industry performance, gained 2.6% this year through May 30.

Einhorn has been taking fewer, more concentrated bets after losses last year coupled with client withdrawals caused assets at his hedge fund to shrink by about 60% to $2.5 billion at the start of the year. His New York-based firm managed $12 billion at its peak.

Related: Einhorn’s Reinsurer Conducts Strategic Review, Reduces Risk

Separately, Greenlight Capital Re Ltd., where Einhorn oversees investments, is planning a strategic review after ratings firm A.M. Best criticized the reinsurer for poor underwriting. The reinsurer has shifted the majority of the investments in its portfolio to cash and short-term Treasuries until the review is finished, according to a regulatory filing.

Earlier this month, Einhorn credited gains in General Motors Co. -- Greenlight’s biggest public U.S. stock holding as of March 31 -- for his hedge fund’s rebound. The automaker had a rough May after earnings showed it’s suffering from a slowdown in China and losing market share in North America. The outlook worsened Friday after President Donald Trump threatened to impose a tariff of as much as 25% on goods from Mexico -- the largest source of U.S. vehicle and auto-parts imports and a key production hub for GM.

The company’s shares fell 4.3% Friday, bringing its decline for the month to 14%. Greenlight’s four other biggest public stock holdings -- Green Brick Partners Inc., Aercap Holdings NV, Brighthouse Financial Inc. and Consol Coal Resources -- also fell in May with the broader market.

Read more about Einhorn’s hedge-fund midlife crisis here.

Still, Einhorn has had a winner this year with his wager against Tesla Inc. The shares have nosedived by more than 40% in 2019 amid growing skepticism about consumer demand for the company’s electric vehicles. The money manager has been shorting a group of momentum-driven technology stocks, which may have also bolstered his portfolio in May. Einhorn has said that group includes Amazon.com Inc. and Netflix Inc. GATX Corp., another known short of Einhorn’s, fell about 9.5% in May.

A representative for the firm declined to comment.

— With assistance by Gabrielle Coppola

(Updates with details on reinsurer in fourth paragraph.)