| NEW YORK, July 29
NEW YORK, July 29 Hedge fund manager David
Einhorn's reinsurer Greenlight Capital Re, Ltd. cut its
gold holdings in the second quarter as prices of the precious
metal plummeted, a regulatory filing showed on Monday.
The reinsurer, for which Einhorn serves as chairman, cut its
commodities holdings to $50.5 million in the quarter ended June
30, down from $90.3 million in the first quarter ended March 31.
"The decrease in commodities was due to a decline in the
price of gold combined with the disposal of a portion of our
physical gold holdings," the filing said.
Gold plunged 23 percent in the three months to June,
its biggest quarterly drop on a record of at least 45 years due
to selling amid fears the U.S. Federal Reserve may wind down its
bond-buying stimulus, according to Reuters data.
Fed Chairman Ben Bernanke told Congress on May 22 that the
central bank may begin to scale back its $85 billion in monthly
purchases of Treasuries and agency mortgages later this year if
the U.S. economy looked strong enough.
Gold, typically seen as a hedge against inflation, sank
below $1,200 an ounce on June 27 for the first time in nearly
Einhorn, who runs the $8 billion hedge fund Greenlight
Capital, suffered an investment loss of 11.8 percent in June in
the firm's offshore gold fund, two sources close to the matter
But Greenlight said in the filing that it plans to continue
holding a "significant position in gold, macro positions in the
form of options on higher interest rates and foreign exchange
rates, short positions in sovereign debt and sovereign credit
default swaps" for the foreseeable future.
Einhorn said in May in a conference call for his Cayman
Islands-based reinsurer that the regime change at the Bank of
Japan supported his outlook for stronger gold.
He was referring to the appointment of governor Haruhiko
Kuroda, who committed the central bank to a $1.4 trillion burst
of monetary stimulus to fight deflation, mainly through
purchases of long-term Japanese government bonds.
In the latest filing, the reinsurer also said the equity
market's "rapid advance is creating a potentially unstable
condition which could resolve a number of ways and is difficult
to predict," citing a challenging earnings backdrop, a slowdown
in China and the continuation of "emergency policies."
Hedge funds are turning to reinsurers to become a permanent
source of capital that is not subject to investor withdrawals.
The reinsurers use their premiums to take positions in the hedge
funds that set them up.