Exclusive: Einhorn - raising new money as performance lags

Fri Nov 28, 2014 4:22pm EST
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By Svea Herbst-Bayliss

BOSTON (Reuters) - Superstar investor David Einhorn is raising cash for the first time since 2012 following three straight years of lagging performance - and some customer redemptions from his $10 billion hedge fund, Greenlight Capital.

Einhorn has delivered an average 19 percent annual return over 18 years. But slower annual growth in the last years, plus the fund's restrictive redemption policies, have raised questions among some of his clients about Greenlight's prospects.

Einhorn’s fund has returned 4.9 percent this year through October, compared with a 13 percent gain by the benchmark Standard & Poor's 500 Index. Similarly, he trailed the S&P 500 by 13 percentage points in 2013 and by 8 percentage points in 2012.

"We haven't had a quarter this thin in about three years," Einhorn wrote to investors regarding the recent third-quarter period. "We just got ground down gradually."

Some of Einhorn's short positions have weighed on performance this year, investors said. He recently closed out his short bet against Keurig Green Mountain Inc. with a loss. "We had many opportunities to trade this position to a successful result, but failed to do so," he wrote in the quarterly letter, which was seen by Reuters.

Also hurting performance: bets against U.S. Steel and Mallinckrodt and a bet on Marvel Technology Group Ltd, which lost 9 percent in the last six months.

While the average hedge fund returned only 3 percent this year, some of Einhorn's more direct competitors are doing better. William Ackman has posted a 35 percent return at his $18 billion Pershing Square Capital Management through the end of October, Ackman said in a letter to his investors.

Einhorn, Ackman, and Third Point's Daniel Loeb, who also has about $18 billion in assets, have long been seen as equally skilled by investors - and for a time the trio had a lot of overlap among clients.   Continued...

David Einhorn, founder and president of Greenlight Capital, smiles as he speaks at the Sohn Investment Conference in New York, May 5, 2014.  REUTERS/Eduardo Munoz