Hedge fund reinsurer investment fortunes reverse in Q2 2016

by Artemis on June 1, 2016

Fortunes of the two main hedge fund reinsurance strategy proponents, David Einhorn backed Greenlight Re and Daniel Loeb backed Third Point Re, have reversed in the second-quarter to-date, with Einhorn’s Greenlight Re suffering an investment loss, while Loeb’s Third Point Re reported positive returns.

The first-quarter of 2016 saw Greenlight Re come out ahead, in terms of investment returns, with the Cayman Islands based reinsurance company reporting a positive 2.5% return, compared to Bermuda-domiciled Third Point Re which fell to a -2.1% investment loss for the quarter.

Fortunes have now been reversed, and the two leading hedge fund reinsurance firms have seen their investment returns switch from positive to negative for Greenlight Re and vice versa for Third Point Re, as the second quarter progresses.

This may be a reflection of further adjustments made to their investment portfolios beginning to reflect themselves in performance, as changes can take some time to manifest and can be affected differently by broader investment and asset trends, demonstrating the different investment strategies of the two hedge fund managers.

The second-quarter began with a reversal of fortunes, as Third Point Re reported a positive investment return of 1.8% for April 2016, leaving it at still negative for the year to that point at -0.2%, while Greenlight Re reported -0.7% for April dropping to 1.8% for the year to end of April.

May saw the reversal of fortunes continue, with Third Point Re again achieving a positive 1.7% return for the month, while Greenlight Re fell to a negative -1.8% return.

After coming out of the first-quarter 4.6% ahead, Greenlight Re has now fallen behind Third Point Re, after the Loeb backed reinsurance firm gained 5.5% in just the last three months.

Greenlight Re now stands level for the year, with -2.5% in Q2, which wiped out Q1 for the firm, and a 0% investment return after the first five months. Meanwhile Third Point Re now boasts a positive 1.5% investment return for 2016 so far, after the first two months of Q2 saw a 3.5% investment gain.

The investment fortunes of the two leading hedge fund backed reinsurance firms show that volatility is still evident in financial markets and that investment choices matter. Following the difficult second half of 2015 these hedge fund managers clearly adjusted portfolios and for Third Point Re the market has moved in such a way that it is now feeling the benefits, in terms of investment gains, while Greenlight Re is currently suffering.

Of course, the market could move again in the coming months and fortunes for these hedge funds and their reinsurance arms could reverse again.

The strategies of these hedge fund reinsurers clearly respond to market conditions in different ways, which provides investors with choice and can make them very profitable. However when financial markets are volatile the opposite can be the case, and as evidenced by Greenlight Re in Q2 so far the volatility has not yet gone away.

Also read:

Hedge fund reinsurers investments & underwriting diverge in Q1 2016.

Hedge fund reinsurer investment results continue Q1 2016 divergence.

Hedge fund reinsurer investment returns continue to diverge in 2016.

Einhorn investment loss can’t be avoided at Greenlight Re.

Hedge fund reinsurer challenges continue, hybrid model to evolve : Fitch.

2016 starts positively for Greenlight Re, negatively for Third Point Re.

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