When the going gets rough, good hedge fund managers know how to hedge. A case in point: Greenlight Capital’s David Einhorn.
For the second straight month, Einhorn, who Thursday ended discussions to buy a big chunk of the New York Mets, reported he lost 1.1 percent in August. However, this was still much better than the S&P 500, which lost 5.7 percent for the month.
In July, he posted a 1 percent gain when the widely followed benchmark lost 2.15 percent.
Even so, Einhorn is still down 5.3 percent for the year.
Einhorn is betting heavily on the continuation of Apple’s success and the upward movement in the price of gold. His three largest disclosed positions at the end of August were shares of Apple, gold, and Market Vectors Gold Miners, an exchange traded fund.
Although it is a little obsessive to look at a one-month performance for a hedge fund manager, it is still interesting to see how they have maneuvered through the recent two-month volatility in the global markets. And Einhorn, who has compounded at more than 21 percent per year since he founded Greenlight in 1996, is the first fund to report its results for August.
Meanwhile, London-based giant Brevan Howard is continuing to prove it is among a small group of elite hedge funds, especially during volatile periods when the markets have declined. Through Friday, August 26, the fund founded by Alan Howard was up 6.39 percent for the month and 11.34 percent for the year. In July, it was up 2.2 percent. In 2008 when the global markets all but melted down, the $24 billion Brevan Howard Master Fund was up an astonishing 20.43 percent.
The fund uses active leveraged trading and invests mostly in global fixed income and foreign exchange markets, employing a combination of global macro and relative value trading strategies. According to sources, Brevan Howard has been tactically trading all year rather than taking advantage of any big themes. And the fact the global markets have repeatedly flipped from risk-on to risk-off several times this year, suggesting it is very hard to put on a big theme trade. The firm has been heavily positioned for a global slowdown and as the markets started to discount that possibility over the summer their positioning, which was basically ‘risk-off’, worked out.
According to the firm, in July the fund made money mainly in interest rates trading. Small gains were also made in commodities, credit and equities. It also suffered small losses in foreign exchange. As of the end of July, however, 48 percent of its exposure was in Europe, according to a report to clients. Another 25 percent was invested in the Americas. Its largest exposure by far was to the Euro.
