Seth Klarman’s Baupost Group will return 5% of its capital to investors at the end of the year, says a source who has viewed a November 8th letter from Klarman to Baupost’s investors.Baupost has generated an monstrous $6.5 billion in net investment profits from January 1, 2009 to September 2010 (“net” of an estimated $2 billion of performance and management fees).
This growth has propelled the firm to an enormous $23 billion in assets. Klarman considers this size too large for the current market environment, in which he finds opportunities scarce.
“Today, Baupost’s opportunity set is smaller than it has been in some years,” Klarman wrote, “while our cash balances have grown…”
So Baupost’s happy investors are getting 5% of their money back at the end of the year, whether they like it or not.
And other investors, who are just now getting bullish, might want to ask themselves what they’re seeing that Klarman – and other hedge fund managers who are retiring for lack of opportunity (like Stanley Druckenmiller) – aren’t.