Greenlight Capital Drenched In Red

Jan 26 2009 | 2:09am ET

Activist hedge fund shop Greenlight Capital’s flagship fund fell by almost a quarter last year, the first time it has suffered an annual loss.

The firm’s eponymous $5.1 billion fund fell 23% last year, Bloomberg News reports. In a Jan. 20 letter to investors, Greenlight said it made “too many mistakes” last year, especially its bets on Helix Energy Solutions Group and Volkswagen.

“We added aggressively to our position in [Helix] at exactly the wrong moment,” as Hurricane Gustav devastated its production in September. The stock lost 70% of its value in the fourth quarter.

On the short side, Greenlight’s bet against Volkswagen backfired in abig way when the stock nearly quadrupled in price on word that Porsche was increasing its stake in the German automaker.

“We held our nose and covered a portion of our position at a significant loss,” Greenlight told investors.

The firm gave its clients some insights into how it planned to turn things around, pointing to increased stakes in utility Allegheny Energy and communications equipment maker CommScope. The fund is also betting on gold, gold companies and the yen.

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