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Morning Brief: Einhorn’s Greenlight Capital Ends 2017 Up — Barely

The fund struggled all year, hurt by shorts on soaring stocks like Tesla and Netflix.

  • By Michelle Celarier

After struggling all year, David Einhorn’s Greenlight Capital ended 2017 in the black — but just barely.

It posted a 2 percent gain in Greenlight’s main fund, according to an individual familiar with the returns. The investment portfolio gained only 1.5 percent in Greenlight Re, Einhorn’s publicly traded reinsurance company, which tracks the hedge fund.

Greenlight barely broken even in a year when the Standard & Poor’s 500 stock index gained more than 20 percent.

Einhorn was hurt by some high-profile shorts last year, specifically Tesla and Netflix, both of which soared during 2017. Tesla rose about 46 percent, while Netflix gained 55 percent during the year.

Greenlight remains well below its high-water mark, having gained 9.4 percent in 2016 after losing 20.2 percent in 2015.

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Bill Ackman’s Pershing Square Capital Management and Valeant Pharmaceuticals agreed to pay $290 million to settle a long-simmering lawsuit filed on behalf of Allergan shareholders alleging insider trading during the duo’s hostile takeover attempt of Allergan in 2014.

“We continue to believe the case had absolutely no merit,” Ackman said in a statement. “We decided, however, that it was in the best interest of our investors to settle the case now instead of continuing to spend substantial time and resources pursuing the litigation.”

In a tentative settlement agreed among the parties, Pershing Square will pay $193.75 million of the total cost. The hedge fund firm had earlier reached a deal with Valeant that would have forced the pharmaceutical company to pay 60 percent of the total, but agreed to pay more to strike a deal with plaintiffs.

“Valeant and Pershing Square had different views on the desirability and timing of settling the case, which previously prevented settlement,” the hedge fund firm said in a statement. “On December 19, 2017, Pershing Square acquired control of the settlement of the litigation in exchange for agreeing to pay a greater percentage of the settlement amount. “

The settlement must still be approved by the federal judge overseeing the case. Pershing Square had previously set aside $75 million to cover the cost. It said that the additional costs will reduce its funds’ performance by 132 basis points.

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A Bridgewater Associates executive and his family were among 12 people killed when a plane crashed in Costa Rica on December 31.

Bruce Steinberg was a senior investor at the hedge fund firm. He was traveling in Costa Rica with his wife, Irene, and their three sons, Zachary, William, and Matthew, when their plane crashed at approximately noon in Guanacaste. All 12 passengers, including ten Americans and two Costa Rican pilots, were killed.

“Bruce Steinberg and his family were parts of our greater Bridgewater family,” the firm said in a statement to Institutional Investor. “Right now, we are each processing this devastating loss in our own ways and planning to gather in mourning and in support of his family.”

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Kentucky taxpayers and the Kentucky Retirement Systems’ pension funds sued KKR and Blackstone Group and their founders and others over the poor performance of their hedge funds, Bloomberg reported.

Investors allege that KKR and Blackstone contended that the “black-box” hedge fund investments sold to them were “riskless,” Bloomberg reported. But they argue that instead, “these investments have contributed to the pension system’s virtual insolvency,” according to Bloomberg.

Among the defendants are KKR co-founders Henry Kravis and George Roberts, Blackstone founder Stephen Schwarzman, Paamco CEO Jane Buchan and Prisma Capital Partners CEO Girish Reddy.

“The claims are baseless,” Matt Anderson, a spokesman for Blackstone, said in an emailed statement to Bloomberg. “The Blackstone fund referenced in the complaint delivered to the Kentucky Employees Retirement System positive returns outperforming relevant benchmarks.”

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