Macro investing continues to drive results at Greenlight Capital. But not always for a good reason.
The strategy was responsible for virtually all of the value-oriented hedge fund’s 9 percent return in 2025 — as well as the fund’s 1.5 percent loss for the first nine months of this year.
Institutional Investor previously reported September and year-to-date results for Greenlight, the hedge fund headed by David Einhorn that is widely known as a long-short hedge fund. However, macro investing is also an important part of it.
The firm’s third-quarter client letter, dated October 21 and obtained by II, provides detailed insight into how each of the strategies impacted the fund in the third quarter and year-to-date, as well as how Greenlight is positioned for the final quarter of 2026. Most significantly, the letter discloses that the macro book lost 6 percent over the first nine months this year. Long positions kicked in 5.1 percent to year-to-date performance, and shorts accounted for 0.6 percent.
In the third quarter, macro detracted from performance by 2 percent, and longs cost the fund 8.5 percent. Shorts offset those losses with a 7.1 percent positive contribution.
Discussing this year’s macro book declines, Greenlight points out that the hedge fund wrongly bet that the Federal Reserve would lower interest rates, costing the fund “a couple of points more than the macro book’s total loss this year.” It explains: “When we entered the position, the market expected one to two rate cuts. We sized the position because a) we believed President Trump would appoint a Fed chair who would, by hook or crook, push his agenda to lower rates, and b) we anticipated that a reasonable worst case would be no interest rate cuts.”
Greenlight concedes that as the Fed raises rates and the market anticipates further hikes, the fund has lost more than it expected in its reasonable worst-case scenario. “Even though it became clear that rates would not be cut, we continued to believe the market had gone too far in pricing in an adverse outcome,” it says.
For risk management purposes, Greenlight says, it cut its position by one-third in the third quarter: “Our remaining position extends into next summer, and we maintain the view that the market is pricing in more hikes than will occur. Should that prove correct, we will recover a portion of our loss.”
In 2025, when Greenlight added 9 percent, its macro book accounted for virtually all of its return and alpha. It said in the fourth-quarter letter that most of its macro investments made money last year, led by gold, which appreciated 64 percent. Greenlight added that its medium-size position in copper was a “notable winner.” It used options on copper futures to make the investment and said copper prices rose 40 percent.
Greenlight also made money on interest rate futures, stressing that it correctly predicted the Federal Reserve would cut rates when others didn’t expect it to. It had smaller macro gains in sovereign debt and foreign currency and a minor loss in inflation swaps.
In the letter, Greenlight discussed how it applies the macro strategy to its overall fund: “When we have a macro insight, the goal is to express it as directly as possible, such that we are most likely to succeed or fail based on the insight itself. For example, if we are bullish on gold, copper, or interest rates, we should own gold, copper, or interest rates. We judge our strategy in this regard to be effective. Others might express a similar view by being long equities or mining companies or interest-sensitive financial institutions. If we try to express our view on copper by owning equity in a copper mining company, we are also exposed to what happens at the mines or hedging decisions made by the company.”
