Key Takeaways
- • Greenlight Capital's main fund declined 26.1% in the first nine months of 2018, positioning the hedge fund for its worst year on record, according to an investor update reviewed by Bloomberg on September 28.
- • David Einhorn's value-investing strategy significantly underperformed major benchmarks year-to-date: the S&P 500 returned 10.6% through September 27, while the HFRX Global Hedge Fund Index fell 1.3% over the same period.
- • Greenlight posted a loss of 1.3% in September alone as U.S. stocks edged higher, extending a pattern of underperformance that mirrors broader challenges in the hedge fund industry during 2018.
- • Historical performance context reveals this represents a dramatic reversal from recent years; Greenlight returned 1.6% in 2017 and experienced a 20.2% loss in 2015, the fund's second annual loss on record.
Summary
David Einhorn's Greenlight Capital is on track to record its worst annual performance since inception, with the fund's main portfolio declining 26.1% through the first three quarters of 2018. According to an investor update viewed by Bloomberg, this performance places Greenlight substantially behind both the broader equity market and its peer hedge funds. The S&P 500 Index generated a 10.6% return through September 27, including reinvested dividends, while the HFRX Global Hedge Fund Index, a widely tracked barometer of hedge fund performance, posted a modest 1.3% loss for the year through the same date.
Einhorn's value-investing approach has proven particularly vulnerable in the 2018 market environment. The fund's September performance was negative at 1.3% as U.S. equities advanced, reflecting a continued lag in a year marked by sector rotation and momentum-driven trading patterns that have historically challenged value-oriented managers. This September decline contributed to cumulative losses that dwarf prior difficult periods for the fund.
The 2018 performance represents a marked deterioration from Greenlight's recent history. The fund posted a 1.6% return in 2017 and a 7.9% gain in 2012, though it suffered significant losses in 2015 with a 20.2% decline—the second annual loss in the fund's history at that time. From peak assets of $11.8 billion in 2014, the fund has faced persistent headwinds that have compressed both returns and, by extension, assets under management. The current trajectory suggests 2018 will stand as a historic underperformance year for one of the hedge fund industry's most prominent value investors.
Einhorn's value-investing approach has proven particularly vulnerable in the 2018 market environment. The fund's September performance was negative at 1.3% as U.S. equities advanced, reflecting a continued lag in a year marked by sector rotation and momentum-driven trading patterns that have historically challenged value-oriented managers. This September decline contributed to cumulative losses that dwarf prior difficult periods for the fund.
The 2018 performance represents a marked deterioration from Greenlight's recent history. The fund posted a 1.6% return in 2017 and a 7.9% gain in 2012, though it suffered significant losses in 2015 with a 20.2% decline—the second annual loss in the fund's history at that time. From peak assets of $11.8 billion in 2014, the fund has faced persistent headwinds that have compressed both returns and, by extension, assets under management. The current trajectory suggests 2018 will stand as a historic underperformance year for one of the hedge fund industry's most prominent value investors.
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