|| Baupost Group founder Seth Klarman. Photo:
Seth Klarman’s Boston-based Baupost Group plans
to return about $4 billion at the end of the year, according to
sources with knowledge of the firm's plans, Alpha can
We reported in September that Baupost had decided
to give money back to investors at year-end, but the firm had
not yet determined the amount at that time. Earlier this year
we reported that Baupost told clients in a quarterly letter
it would probably return some capital to investors at year-end
unless investment opportunities dramatically increased by later
in the year. However, those opportunities have not
In a letter dated April 29, Klarman said the goal is "to
better match our assets under management with the opportunity
set we see for new investments." The decision was made, in
part, after a series of discussions with clients on the
firm’s quarterly webcasts with investors.
When Baupost completes the capital distribution, firmwide
assets will likely be more than $25 billion, according to a
source. Earlier this year we reported the firm’s
goal is to keep assets at $25 billion.
This is only the second time in the hedge fund
firm’s 31-year history that it is returning money
to investors. The previous time was in 2010, and Baupost
subsequently raised money in early 2011.
At the end of 2012, Baupost had nearly $26.7 billion under
management, making it the seventh-largest hedge fund firm in
the world, according to the most recent annual Alpha
ranking of the world’s 100 largest hedge fund
Baupost’s many partnerships were up 13 percent,
on average, through the September quarter. Its annualized
return since inception is in the high teens.
Baupost’s performance is even more impressive
given its penchant for holding large amounts of cash. It has
averaged 33 percent of assets in cash, and its cash balance can
reach as high as 50 percent.
The firm, which Harvard Business School alumnus Klarman
helped to found, is often misdefined as a value investor. It is
actually an eclectic investor that seeks undervalued, ignored
assets — or those that are very complex —
mostly among distressed debt, commercial real estate, mortgages