Baupost Group

Last updated
The Baupost Group
Company type Limited liability (LLC)
Industry Hedge fund
Founded1982;43 years ago (1982)
Founders
Headquarters Boston, U.S.
Key people
  • Seth Klarman (president)
  • Jim Mooney (managing director)
Products Hedge funds
AUM US$25 billion (2022) [1]
Total equity US$ 1.8 billion
(2020) [2]
Number of employees
61 (2020) [2]
Website www.baupost.com

The Baupost Group is a hedge fund [3] founded in 1982 by William Poorvu and partners Howard Stevenson, Jordan Baruch and Isaac Auerbach. Seth Klarman, who was asked by Poorvu to help run the fund, remains at its head today. [4] Baupost Group's investment philosophy emphasizes risk management and is long-only. [5] [6] The firm, one of the largest hedge funds in the world, is a value investing manager. [7] [8] According to Bloomberg L.P., Baupost is ranked 4th in net gains since inception. [9]

Contents

Investment strategy

Risk

It was reported that the Baupost Group does not use leverage in its investments with the exception of real estate where for every one dollar invested the Baupost Group used one dollar of leverage. [10]

It was reported that Baupost CEO Seth Klarman explained in a speech to MIT students that investment research driven by emotion is risky and can lead to a bad investment. [11]

Performance

From its founding the firm have generated an average annual return of 20%. [7] [10] [12]

From 2014 to 2024 Baupost generated returns of about 4% per year [13]

Investment history

With the rise of distressed debt sales in Europe caused by the sovereign debt crisis Baupost Group in 2011 opened its first international office in London to take advantage of investment opportunities in European commercial property market, corporate debt trading at distressed valuations and structured products. [14]

Walnut Place

According to a Reuters article, which cites Bank of New York Mellon v. Walnut Place LLC et al., [15] the Baupost Group is Walnut Place. Using a traditional hedge fund tool, legal challenges of distressed bond settlements, the Baupost Group is attempting to force Bank of America to increase its settlement of Reps & Warranties of Countrywide sub-prime bonds. If the settlement were to be increased The Baupost group stands to make gains on bonds that they bought at very low values. It is unclear why the Baupost Group did not use their real name in the suit.

Natural resource extraction in Melancthon, Ontario, Canada

In 2006 Baupost Group formed Highland Companies, a Nova Scotia-based corporation that began buying farmland in Melancthon Township, approximately 120 kilometres north of Toronto, Ontario, purportedly for the purpose of farming. Having amassed over 7,000 acres by early 2011, then being actively farmed by Highland Companies, the Company submitted an application for a 2,316-acre Amabel dolomite mega-quarry. The application has seen heated opposition, as opponents raise concerns about groundwater contamination, local heritage, food security concerns, as well as a host of ancillary issues such as truck traffic congestion, highway safety, noise and dust pollution. [16] In November 2012, Highland Companies withdrew the application in response to that concerted community opposition. [17]

Post financial crisis of 2007–2008

After the financial crisis of 2007–2008, Baupost Group sought to purchase insurance as a hedge against the value of money declining as a result of government intervention which was a risk researchers at the company were concerned about. To execute this, Baupost Group purchased options for five-year Treasury bonds that would become profitable if Treasury bonds dropped sharply. [7]

Company

It was reported that in 2004, 42 employees worked at Baupost Group: 12 investment focused and 30 administrative. [4]

Assets

Baupost Group's assets were $30 million in 1982, and $29.9 billion as of December 31, 2013. [8]

Offices

Key people

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References

  1. ↑ Wigglesworth, Robin (23 January 2023). "RIP the cult of the Tiger cub". Financial Times .
  2. 1 2 "The Baupost Group Review". The Baupost Group Review. March 18, 2021. Retrieved 7 April 2020.
  3. ↑ John Longo (20 March 2009). Hedge Fund Alpha: A Framework For Generating And Understanding Investment Performance. World Scientific. p. 294. ISBN   978-981-4469-92-0. ...long-only hedge fund shop, Baupost Group...
  4. 1 2 Bruce C. N. Greenwald; Judd Kahn; Paul D. Sonkin; Michael van Biema (12 January 2004). Value Investing: From Graham to Buffett and Beyond. John Wiley and Sons. pp. 231–. ISBN   978-0-471-46339-9 . Retrieved 30 July 2011.
  5. ↑ Frank K. Martin (24 May 2011). A Decade of Delusions: From Speculative Contagion to the Great Recession. John Wiley and Sons. pp. 181–. ISBN   978-1-118-07816-7 . Retrieved 30 July 2011.
  6. ↑ Roger Lowenstein; Long-term Capital Management (Firm) (12 September 2000). When genius failed: the rise and fall of Long-Term Capital Management . Random House. pp.  97–. ISBN   978-0-375-50317-7.
  7. 1 2 3 Zweig, Jason (22 May 2010). "Legendary Investor Is More Worried Than Ever". The Wall Street Journal .
  8. 1 2 "2013 – Baupost Group To Get Substantially Richer With Lehman". ValueWalk. Archived from the original on 2013-11-04.
  9. ↑ "Dalio Earned Clients $13.8 Billion to Lead Hedge Funds as Paulson Slumped". Bloomberg.com. Bloomberg. 29 February 2012.
  10. 1 2 Janet Lowe (30 December 2010). The Triumph of Value Investing: Smart Money Tactics for the Postrecession Era. Penguin. ISBN   978-1-59184-374-0 . Retrieved 30 July 2011.
  11. ↑ David Gardner; Tom Gardner (26 January 2009). The Motley Fool Million Dollar Portfolio: How to Build and Grow a Panic-Proof Investment Portfolio. HarperCollins. pp. 18–. ISBN   978-0-06-172003-1 . Retrieved 30 July 2011.
  12. ↑ "How Seth Klarman Achieved a 20% Annual Return for 30 Years". 23 July 2022.
  13. ↑ https://www.bloomberg.com/news/articles/2025-01-22/baupost-clients-pulled-7-billion-since-2021-after-poor-returns?leadSource=reddit_wall
  14. 1 2 3 Kuo, Patricia (May 6, 2011). "Klarman's Baupost to Set Up in London to Cash In on European Debt Crisis". Bloomberg. Retrieved 31 July 2011.
  15. ↑ The case is Bank of New York Mellon v. Walnut Place LLC et al, 2nd U.S. Circuit Court of Appeals, No. 11-4571.
  16. ↑ "No mega quarry" . Retrieved 10 January 2012.
  17. ↑ "Coalition of farmers and urban foodies halts Ontario mega-quarry (Globe and Mail)". The Globe and Mail .
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