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Michael P. Regan

How Einhorn Survived a Nightmare Year

Built-in withdrawal restrictions and a long track record kept investors largely in the fold.

Even when a hedge fund has an awful year, which was the case for David Einhorn's Greenlight Capital, there are lessons to be learned.

Many funds would have had a tough time surviving a year like Einhorn experienced in 2015, when all the stars seemed to align against him and Greenlight Capital lost more than 20 percent. Investors tend to flee funds that underperform like that, sometimes causing a fire sale of positions as they're forced to raise cash for redemptions. 

The key to Einhorn's survival had nothing to do with his investments, which turned sour at an alarming rate -- from owning some of 2015's worst stinkers like Consol Energy, Micron Technology and SunEdison to short bets against Netflix and Amazon, two of the year's brightest stars. Instead, it had everything to do with how Greenlight manages investor cash on the way in and out the door.