Hedge fund manager David Einhorn has said his firm Greenlight Capital is prioritising capital preservation as markets rally on easing geopolitical tensions, warning that investors may be overlooking downside risks, according to a report by CNBC.
In his latest investor letter, dated Monday and reviewed by CNBC, Einhorn said the fund is maintaining a cautious posture despite recent market strength. He emphasised that with limited risk currently priced into equities, Greenlight is prepared to potentially miss further upside in order to protect capital if conditions deteriorate.
His comments come as US equities have rebounded sharply, with the S&P 500 recovering all losses triggered by the onset of the Iran-related conflict. Markets have continued to climb even after weekend talks between the US and Iran broke down, as investors remain hopeful that diplomatic progress is still possible.
Despite the rally, Greenlight reported a relatively conservative positioning profile, with lower gross and net exposure than in more aggressive market environments. The fund returned 6.5% in the first quarter, outperforming the S&P 500’s 4.4% decline over the same period, but Einhorn said valuations and macro uncertainty continue to justify restraint.
He described the current environment as one where investors are attempting to balance caution with participation in potential upside, noting that many market participants appear unwilling to fully step aside from the rally even amid uncertainty.
Greenlight had already entered the recent period with reduced exposure, citing stretched valuations. The firm has made only incremental portfolio adjustments, including trading around index hedges and holding a long position in October crude oil futures, which has delivered modest gains given expectations that supply disruptions may remain limited.
Performance during the quarter was supported by positions in gold, Acadia Healthcare, DHT Holdings, and Core Natural Resources. The fund also opened new positions in Versant Media Group, alongside smaller investments in Crocs and SLM Corp.
