Passing on Seth Klarman: Doubts Rise About the

Iconic Hedge Fund Blaupost

blog.validea.com/passing-on-seth-klarman-doubts-rise-about-the-iconic-hedge-fund-blaupost

September 21, 2020

A recent article in Institutional Investor reveals that “doubts have begun to percolate
within the elite investor class” about Seth Klarman’s iconic hedge fund Baupost Group.

The article quotes one investor who claims, “Seth is running Baupost more like a wealthy
person might run their personal money than like the aggressive hedge fund manager that
he’s been over the years. He has pretty considerable net worth and all of his money
invested in that firm. Other people’s fees are paying for him to run his personal money.”
The investor adds, “Even though we have terribly high regard for Seth, this isn’t what we
want,” noting a slip in performance and a departure from the consistent, thoughtful
investment process the firm has shown for decades.

According to the article, that opinion is shared by ten “knowledgeable institutional and
family office investors that II interviewed, agreeing to anonymity so they could speak
freely.”

One investor, who was presented with the opportunity to invest with Baupost for the first
time, said “I can’t believe I’m saying this, but I am passing on Seth Klarman,” adding that
after reviewing the firm’s numbers, they concluded that the investment would not be
worth the “headache and the lockup of capital” which is longer than usual among hedge
funds.

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The article quotes a current Baupost client who predicts that the firm’s fate will play out
over the next five to ten years: “If there is a distressed cycle and they make good use of it,
they’ll be twice as big in ten years. If things continue as they are, they’ll leak assets and be
half the size, a quarter of the size in five years.”

Hedge Funds Seth Klarman

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