Einhorn’s Greenlight reports August, down badly

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    David Einhorn

    David Einhorn‘s Greenlight Capital revealed that its fund was down 5.5 percent in August, bringing the year to date loss to 14 percent, according to its web site. Looking for the silver lining, the hedge fund, known for its activism and finding value in the stock market with strong recent years past performance, did slightly outperform the S&P 500 stock index at least on a monthly basis, which was down 6.3 percent in August.

    Greenlight

    Greenlight under-performing on a yearly basis

    The August losses come as other hedge fund strategies had performed to various levels. Daniel Loeb’s Third Pointhedge fund was down -5.1 percent in August, but remains higher on the year by a slim 0.02 percent. Balyasny Asset Management, meanwhile, adjusted its strategy parameters to hedge what they saw as the logical potential for volatility and were said to be near flat in August and up from 3 to 7 percent on the year, according to people familiar with the matter. (Additional report to come.)

     According to the most recent HSBC Holdings plc (ADR) (NYSE:HSBC) (LON:HSBA) Hedge Weekly performance ranking, through August the Equity Diversified / USA hedge fund category was up 0.88 percent year to date. The Multi-Strategy / Global category was up 1 percent while the Equity Diversified Long / Short category, which includes John Burbank’s Passport Special Opportunities Fund, was up 7.51 percent. It should be noted that some of the funds in the HSBC report had not reported their August performance. The Newedge CTA index, an benchmark of the largest algorithmic traders which requires firms to report performance on a daily basis, looked to close out August near a 1 percent loss.

    Greenlight asks questions, but likely not the questions that matter

    The sharp, unhedged losses come as the fund’s founder, David Einhorn, sent out a survey to his nearly 700 investors, according to a report in the New York Times. It is unclear It is unclear what the questions were, but below are a few questions that would have been most interesting for institutional investors to answer:

    • When you invest in a “hedge” fund, do you expect that the fund will consistently “beat the market” on a multi-year basis, or do you expect that the fund will provide noncorrelated returns to a certain degree, help hedge a portfolio against negative stock market events?
    • If a hedge fund consistently underperforms the S&P 500 on a multi-year basis and delivers a returns stream highly correlated to the stock market, what is the fee level you feel is justified?
    • Do you anticipate a manager to look at both the investment on an individual level as well as consider macro factors that are known on the horizon to have a high probability to impact market volatility (Fed rate hike, China known slowing)?

    These are the questions that should be asked, but likely won’t be.

    Originally published on ValueWalk.