Beaten-down markets have been a boon for Baupost, which has become the sixth-largest hedge fund in the United States & a force to be reckoned with.
by Stephen Taub (Abolute Return + Alpha – June Issue)
Seth Klarman, president and portfolio manager of 28-year-old Baupost Group, is considered the dean of value investing among hedge fund pros, and such a devotee of Benjamin Graham and David Dodd that he was the lead editor to the reissue of their classic, “Security Analysis,” in 2008. With his wire-rimmed glasses, graying beard and kindly smile, the 53-year-old Klarman has a gentle, professorial air about him—and a reputation as a cautious investor who is more likely to be found sitting on a mound of cash than taking big risks in frothy markets.
That being the case, it might be surprising to learn that Klarman’s Baupost bested Carl Icahn in the tussle over CIT Group last year and helped wage a successful activist campaign in a merger battle for a small biotech company. But if Baupost has been able to throw its weight around recently, it’s not just because beaten-down markets provided tremendous opportunities for value investors. It’s also because Klarman has been on such an asset-building binge that Baupost has become the sixth-largest hedge fund firm in the United States, with $21 billion under management—three times the $7.4 billion Klarman managed just three years ago. After raising more than $4 billion in early 2008—the first time in eight years that he had opened his fund to new investors—the founder of once-obscure Baupost has become a hedge fund titan.