Billionaire investor David Einhorn defied market gloom in Q1 2025 with a golden strategy that delivered standout gains for his hedge fund.

What Happened: Einhorn’s hedge fund, Greenlight Capital, outperformed the market in Q1 2025 by investing in gold, which surged 19% and was the “biggest winner” in its portfolio, reported Business Insider.

Greenlight Capital reported an 8.2% return in the first quarter, significantly surpassing the S&P 500’s loss of over 4% during the same period.

The hedge fund, which holds both gold bars and call options, also outperformed a benchmark of hedge funds. The average fund reported a loss of 0.4% in Q1, according to research group HFR.

Greenlight Capital also indicated that the U.S. equity market is entering a bear market. “Sensing that the market was turning, in late February we pivoted from conservative, but not bearish, to bearish,” the firm stated in its letter.

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The firm has lowered its net equity exposure to shield itself from sharp declines and counter-trend upswings. It also identified other trades in its first-quarter letter, including short positions on companies catering to liberal tastes, long positions in SOFR futures, “tail protection” for the dollar, and long-duration inflation swaps.

Why It Matters: Speaking at the 2024 Sohn Investment Conference, Einhorn told CNBC that inflation appears to be reaccelerating and predicted the Federal Reserve may cut interest rates less than expected--possibly not at all. He warned of a potential economic downturn if tight monetary policy persists and said Greenlight has heavily invested in gold, including both SPDR Gold

Furthermore, historical data suggests that gold investments can outperform the S&P 500 during periods of economic uncertainty. This context adds weight to Greenlight Capital’s decision to invest in gold.

Moreover, bearish sentiment has been on the rise, breaking a 35-year record and remaining above 50% for eight consecutive weeks. This trend aligns with Greenlight Capital’s assertion that the US equity market is entering a bear market.

Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.

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