Einhorn's mediocre year

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Hedge funds walk a fine line between a good year and mediocre year.

Just ask David Einhorn, who was cooking for much of 2012, until the fourth quarter rolled around. His Greenlight Capital suffered a 5 percent drop in the quarter, reducing the full year gains to 8 percent.

MarketWatch quoted his recent letter to shareholders, which noted that, "The disappointing fourth quarter result reduced our year from good to pedestrian. While it is hard to view our performance last year as a catastrophe, it nonetheless falls short of our goals."

The S&P 500 Index's rose 13 percent in 2012. What really socked the fund were some underperforming short positions. The best example was Green Mountain Coffee, which surged in the quarter. For the full year, it ended up 74 percent, punishing the shorts. Greenlight Capital ended up with no profits from the position on the year.

At the same time, the fund's long positions also suffered some big setbacks. The fund's large Apple position turned out to be less than a supreme winner, as some big gains were wiped out in the third quarter. The share decline did afford the fund a chance to purchase more shares. The biggest loser of the year was the fund's long position in Marvell. The stock value was cut in half over the year.

Overall, Einhorn will remain an in-demand manager despite his near-miss in 2012. He has generated an average annual rate of return of nearly 20 percent since he launched his fund in 1996.

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