It is never a good thing as a hedge fund manager to consistently lose money on the funds that you run. If you have a losing record for long enough, people will start to distrust your abilities entirely. At that point you will have lost them. Then you have nothing to do but hope that they do not take their money and run. There are some investors in David Einhorn’s fund Greenlight Capital that are probably thinking about doing just that right now.
Einhorn has had an impressive track record in the past of generating returns for his clients. As a matter of fact, he has been known to have the ability to generate returns even when the market as a whole is headed south. Unfortunately, he also can get hit pretty hard when the market just continues to rise and rise.
Greenlight Capital is not a solely short type of fund. However, Einhorn is known for taking bets against certain stocks that he sees as being incredibly overpriced. He has been a critic and short seller of stocks such as Green Mountain Coffee Roasters and Lululemon in the past. When those stocks miss earnings for tumble for some other reason he looks like a genius. When they just continue to rise and rise, he takes a big hit to his fund and his reputation.
February was a terrible month for the Greenlight Capital fund. It lost more than six percent in that single month according to CNBC reporting. That brings the total loss on the year to over twelve percent at this point for the fund. That is not something that a lot of investors will tolerate for an extended period of time. Those numbers are particularly bleak when comparing them to how the market itself has been doing overall lately.
There is plenty of blame to go around for why the losses are what they are. At the same time, perhaps it is not really the time to panic that much about things. After all, investments that have declined some mean they are on sale compared to what they used to be worth. That could be a big deal given that it is always best to purchase investments at as steep of a discount as possible. Perhaps we should view this as an opportunity to get involved with funds like these. If someone does do that, just understand that these things can go sideways in a hurry.