Morgan Stanley, BlackRock Support Einhorn

In the past 12 months or so David Einhorn has been in the news for a variety of reasons. There was his attempt to buy a stake in the New York Mets. There was his talk as to why he’s short Green Mountain Coffee Roasters — the similarity to the big short he put on Lehman Brothers before the bank’s collapse made everybody pay attention.

However, 2011 was not a good year for his hedge funds. On top of that, last month the British regulator fined him for insider trading.

But he has his finger in multiple pies. One of them is a property and casualty reinsurance company based in the Cayman Islands. Called Greenlight Capital Re Ltd. after Mr. Einhorn’s hedge fund firm, the reinsurer went public in 2007. It was fairly successful.

Among the largest shareholders are Morgan Stanley and an arm of giant asset manager BlackRock. Morgan Stanley owns 5.25% of Class A ordinary shares, BlackRock owns 8.5%. The bank has reduced its holding by almost a half from a year ago, while BlackRock went in the opposite direction and increased its stake.

Mr. Einhorn and his family trust own Class B shares, which have greater voting power. He invests the money raised by the reinsurer via his hedge fund firm. That gives him another source of capital besides the investors in the funds. Some of those clients, being averse to headline risk, are not happy about all the recent newsworthy events around him.

If they redeem, the capital provided by the reinsurance company via the major shareholders will become more important for the hedge fund operation.

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