Published January 04, 2013
BOSTON/NEW YORK – Widely followed hedge fund managers Daniel Loeb and David Einhorn ended the year on divergent notes with Loeb's firm handily beating the broader stock market and Einhorn's firm posting a modest single-digit annual gain after performing poorly in December.
For Einhorn, who has moved stock prices by simply opening his mouth, 2012 ended with lackluster returns when his Greenlight Capital lost 2.8 percent in December, a person familiar with the fund's performance said.
Thanks to losses on computer maker and market darling Apple Inc and in the gold market, Einhorn's investors saw their once healthy double-digit gain shrivel late in the year to leave Greenlight Capital with an 8.3 percent increase for 2012.
Einhorn is among a handful of particularly committed Apple investors; he mentioned the company as a favorite pick in May and has told investors that he expected the stock price to hit $700, which it did very briefly in September. In the last three months, however, the price has tumbled about 20 percent and is currently trading at around $531.
With his annual return, Einhorn lagged the broader stock market where the S&P 500 index ended the year with a 13.4 percent gain, excluding dividends. The average global hedge fund gained only 3.17 percent, according to data from Hedge Fund Research.
The disappointing end of the year performance at Greenlight Capital illustrates how even a highly influential manager like Einhorn, who has enjoyed something of a cult following in the $2 trillion hedge fund industry ever since his bearish call on Lehman Brothers in early 2008, can stumble.
For much of the year speculation mounted over which stocks Einhorn would pick or pan with General Motors and Marvell Technology Group getting the thumbs up from the manager.
But Marvell's stock price tumbled at the end of the year after it was ordered to pay $1.17 billion to settle a patent infringement lawsuit likely costing Greenlight Capital millions in losses.
A spokesman for Einhorn declined to comment.
At the same time, Einhorn clearly failed to cash in on supplements company Herbalife where his probing questions on a conference call in May sent the company's share price tumbling and fanned widespread talk that he might be preparing to short the stock price.
But in the end it was William Ackman's Pershing Square Capital Management that unveiled its own big short against Herbalife in late December, helping salvage an otherwise lackluster year for the $11 billion fund. Pershing Square gained 5.8 percent in December to end the year up 12.4 percent, an investor in the fund said.
In 2011, it was Einhorn who got a big boost from having said very publicly in October that he was shorting Green Mountain Coffee Roasters. The ensuing plunge in Green Mountain shares helped Greenlight end 2011 up 3 percent, after being in negative territory for much of 2011.
Meanwhile Loeb, known for his sharp tongue and muscle in trying to get some big U.S. companies to shape up their business, had another stellar year, investors in his $9.3 billion firm said.
His Third Point Ultra fund, which uses borrowed money to boost returns, delivered a 33.6 percent gain for the year after climbing 5.4 percent in December. His Third Point Offshore fund gained 21.1 percent after rising 3.6 percent in December.
While Loeb was also hurt by a drop in the price of Apple and gold, he more than made up for it with savvy bets on Greek government bonds and Yahoo.
He told investors in October that he had scooped up certain Greek government bonds for about 17 cents on the dollar, which were part of a so-called "strip" of 20 newly issued bonds that mostly trade bundled together. Loeb said the market was mistakenly pricing the debt to reflect a Greek exit from the euro zone currency area, something Loeb thought was unlikely and something which has not happened.
Third Point was not available for comment.
Even as many managers are still compiling their 2012 numbers, some hedge fund investors have characterized the year as largely subpar with only a handful of big-name managers able to deliver the kind of outsized returns that made the industry famous.
Activist investing strategies, as pursued by Ackman's Pershing Square and Barry Rosenstein's JANA Partners, were among the industry's biggest winners. JANA's Nirvana Fund gained 33.3 percent for the year while its JANA Partners fund returned 23.2 percent, an investor in the fund said.
Also veteran stock picker Leon Cooperman's Omega Advisors, turned out of their downtown Manhattan offices for weeks by Hurricane Sandy, delivered strong returns with a net return of 26 percent, a person invested with Omega said.
Kenneth Griffin's $14 billion Citadel told investors that its flagship Wellington multi-strategy fund gained 3.4 percent in December to end the year up 25.5 percent, someone familiar with the portfolio said.
Steven Cohen's SAC Capital Advisors, with $14 billion under management and long known for its strong and steady returns, ended the year up 12 percent, people familiar with the portfolio said. Och-Ziff Capital Management, a $32 billion favorite with pension funds and governments, reported that its Master Fund climbed 11.18 percent last year.