Greenlight Has Worst Year Since Founding

January 10, 2019 James Heinsman Hedge Fund News

David Einhorn’s Greenlight Capital posted a 9% loss in December 2018, bringing his yearly decline to a staggering 34%. This is the worst performance since the fund launched in 1996.

The year has been an especially challenging one for hedge funds in general, and for Greenlight in particular. As early as last summer Einhorn was already apologizing to his investors for the firm’s poor performance over the previous three years. In a newsletter sent to his investors in July Einhorn said:

“…over the past three years, our results have been far worse than we could have imagined, and it’s been a bull market to boot.”

“Yes, we have made some obvious mistakes—the worst of which was not assessing that SunEdison was a fraud in 2015—but there have been others. A number of years ago one of our investors said Amazon would surpass Apple and become the most valuable company in the world. We didn’t get it then and, truthfully, we don’t really get it now.”

Greenlight is another casualty of larger economic distress caused by trade wars and shrinking global growth. Yet, Einhorn’s money did even worse than the general marketplace. Whereas the S&P 500 shrunk by 7%, Greenlight’s loss was almost 5 times that number. Some of the firm’s major holdings include General Motors, Brighthouse Financial and Green Brick Partners, all of which had less than stellar performances in 2018, one of which shrunk by 47%.

This past year’s showing contrasts starkly with Greenlight’s many past successful years when he became a superstar for predicting the collapse of Lehman Brothers, considered one of the best predictions of the entire financial crisis. Einhorn had indeed shorted Lehman just a few months before the company famously declared bankruptcy. In 2009 Greenlight had bragging rights to 32% growth for its investors. In 2006 Greenlight had another great year with 24% expansion.

Since 2015 thinks have been less cheery at Greenlight. That year the firm lost 20%, returned only 7% in 2016, and a miniscule 1.5% in 2017. The 2018 debacle of 34% loss is just whatever the opposite of the icing on the cake is.

David Einhorn,

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