Photo: screenshot via ValueWalk.com
Although no exact figures have been released, we know from Baupost Group’s final 2011 letter to investors that the Boston-based hedge fund ended the year on a gain. Without any quantitative factors, that in itself is good news—we all know how badly 2011 crushed hedge funds.In the letter, Baupost founder Seth Klarman reflected on the impactive events of 2011, and also took some time to brag about his $24 billion fund’s good performance amid such a tumultuous economic landscape.
Klarman used a recent anecdote involving one of Baupost’s investors to explain why the hedge fund may be so successful. The investor told Klarman that it is because Baupost doesn’t strive or care about that “best” title (but in effect, when they become one of the best, they will brag about it). Klarman whole-heartedly agreed:
We don’t try to be anyone’s best performing manager in a given year because such an attempt would almost certainly fail. It would distract us from our focus on risk-aversion and the pursuit of excellent long-term results, while shifting our attention toward quick gains, short-term trades and market momentum. We doubt anyone with such a focus could excel, and are certain that attempting to do so would involve heightened risk and diminished long-term returns. In frothy markets, we would rather disappoint clients by being under invested than try to keep up While incurring the risk of large losses.
He’s tooting his own horn a bit, but if Klarman ended 2011 in the green, he probably deserves that moment in the limelight.