When David Einhorn isn't busy playing Texas Hold 'em, dreaming up radical capital-structure theories, yukking it up at investor conferences and getting divorced, he runs a big hedge fund called Greenlight Capital. We know you're probably familiar with that fund's performance as of late, but if not, just know that this year he's been long GM and short Tesla this year.
So this was more or less inevitable:
Mr. Einhorn’s Greenlight Capital Inc. hedge fund was forced to pay back more than $400 million in clients withdrawals at midyear, as more than 15% of eligible investors chose to redeem their money, people close to the firm said. Greenlight, a U.S.-stock specialist, was down 2% in the first half of the year, while the S&P 500 gained 9%, including dividends.
Einhorn is basically your classic long-short hedge funder. He picks a few stocks he likes and/or expects to go up, as well as a few stocks he hates and/or expects to go down. So compared to, say, a quant fund, it's not hard for Greenlight investors to pin underperformance on the man himself, rather than weird market dynamics.
To his credit, Einhorn has always been pretty upfront about his own performance. And to their credit, Greenlight investors have tended to stick with Einhorn (and his fat fees) through thick and thin. Of course, it doesn't hurt that Greenlight is about as difficult to get into or out of as an Ikea.
So why the withdrawals now? Performance is probably a factor, but it's also possible that Einhorn's extracurricular activities are playing a part:
Mr. Einhorn is also in the midst of a divorce, traditionally a sore point for hedge-fund investors wary of any distractions for their highly paid managers. Some hedge-fund investors have automatic policies to withdraw from managers undergoing divorce.
This just doesn't seem fair. Divorce is a fact of life for many. The fact that Einhorn and his peers have to suffer investor withdrawals on top of all the pain and drudgery of a high-dollar split might be one of the few gripes big-name hedgies have that actually deserve sympathy.