Hedge fund Greenlight Capital gained 8.2% in the first three months of 2025, buoyed by a bet on gold that it said should pay off further as it expects Trump administration policies to continue roiling financial markets.
Greenlight founder David Einhorn told investors in a letter seen by Reuters that the firm handily outpaced the broader Standard & Poor's 500 index thanks mainly to investments in gold, which was the portfolio's biggest winner.
"In late February we pivoted from conservative, but not bearish, to bearish," the letter said, adding: "We suspect we are now in a bear market that is just starting."
The firm owns gold bars and call options, the letter said, adding that gold advanced 19% during the quarter. The S&P 500 slipped 4.3% during the first three months of the year.
Investors seeking hints of market trends have long kept close watch on Einhorn and Greenlight's moves. Research group HFR said the average hedge fund was roughly flat in the first quarter, losing 0.38%, on average.
Greenlight described the Trump administration's approach as "go fast and break things" with policies, including deep job cuts at government agencies and tariffs, that are likely to weigh on consumer sentiment and growth.
During the quarter, Greenlight said it added "several short positions in consumer companies" without identifying them. Greenlight expects their share prices to fall as consumers tighten their belts.
Gold is often a hedge against inflation, and Greenlight said White House policies are likely to stoke inflation. "All current Administration policy roads lead to higher longer-term inflation," the letter said.
Slower growth, Greenlight reasoned, will likely force the U.S. Federal Reserve to cut interest rates more than markets expect and the fund has established a position in SOFR (secured overnight financing rate) futures. It also added tail protection in case the dollar depreciates substantially against the euro and yen.
