Hedge fund may realize gold ETFs have no metal

Einhorn's Greenlight Hedge Fund Switches Gold ETF to Bullion

By Saijel Kishan
Bloomberg News
Tuesday, July 14, 2009

http://www.bloombergnews.com/apps/news?pid=20601213&sid=arz6MqVbTVBs

NEW YORK -- Greenlight Capital Inc., the $5 billion hedge-fund firm run by David Einhorn, told investors it switched all of its holdings in a gold exchange-traded fund into bullion during the second quarter.

The New York-based fund said the cost of keeping gold in a storage facility is less than it paid in fees for the SPDR Gold Trust, according to a letter sent to investors yesterday.

Greenlight, started by Einhorn, 40, in 1996, told clients in January it was buying gold for the first time amid the threat of inflation from higher government spending. The firm held 4.2 million shares of SPDR Gold Trust in the first quarter, making the gold-backed ETF its biggest holding.

The firm's Greenlight Capital LP fund gained 16.3 percent in the second quarter, bringing its return this year to 21.5 percent, according to the letter, a copy of which was obtained by Bloomberg News. The fund lost 23 percent last year.

Hedge funds returned an average 9.4 percent this year through June after losing 19 percent in 2008, according to Hedge Fund Research Inc. in Chicago.

Steve Bruce, a spokesman for Greenlight, declined to comment on the fund’s switch.

Hedge funds are private, largely unregulated pools of capital whose managers can buy or sell any assets, bet on falling as well as rising prices and participate substantially in profits from money invested.

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