The Baupost Group

I just read the book "Margin of Safety" written by Seth Klarman.
It is a masterpiece. I was really fascinated.

He is one of few hedge fund managers who is focused on value investing.

Does anyone know more details about him and his firm?..

Is he really only focused on value investing for the long term and not on short/long?

Can a value investor be a hedge fund manager?

Comments (34)

Aug 16, 2011

You're probably trolling but what the hell, I'll bite.

Seriously? There are tons of value investing hedge funds, most of which are long/short funds. I fail to see how shorting comes into the equation, though I understand Klarman's point on the subject. Baupost is incredibly selective.

Aug 16, 2011

One of the toughest hedge funds to get a job at, in the same league as soros/paulson/greenlight/pershing square, in terms of selectivity. I think Klarman is one of the 5 best hedge fund managers in the world right now.

Best Response
Aug 19, 2011

You do realize this is the HF equivalent of saying: "I just watched this movie with Mila Kunis. She seems very attractive, and I would like to bang her. Does anyone have her contact information or know how to get at that?"

the reality is you get both the same way: by proving you don't need them.

    • 3
Aug 19, 2011

I don't get it why so many people think that I am trolling in this thread.
This question may sound dumb because you already work on the wallstreet.
HF is an extrinsic term because there is no HF in Germany due to a strong regulation.

I was just curious because value investing is focused on "margin of safety" to reduce the risk, but short/long are riskier investment objects, so I thought whether Seth Klarman also invests by shorting/longing as value investor.

I may lack the coherence between value investing and short/long (value investing could content short/long, too?!?!).

I have no intension to work there, so the selectivity of his firm was not my main question.

Aug 19, 2011

Baupost isn't a L/S firm. They're a deep value/event-driven fund if you're looking for a style. Value investing principles like those in his book underpin his investment style but that doesn't mean he holds on to a company forever. He simply buys exceptional value when he sees it and sells it once it has returned to fair or better value (or proves to be a value trap). Most of the shorting the firm does is probably related to risk arbitrage trades.

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Aug 23, 2011
GoodBread:

Baupost isn't a L/S firm. They're a deep value/event-driven fund if you're looking for a style. Value investing principles like those in his book underpin his investment style but that doesn't mean he holds on to a company forever. He simply buys exceptional value when he sees it and sells it once it has returned to fair or better value (or proves to be a value trap). Most of the shorting the firm does is probably related to risk arbitrage trades.

Under this metric, would greenlight be a L/S firm because they short stocks? And would paulson advantage fund be considered deep value/event-driven?

Aug 26, 2011
Brady4MVP:
GoodBread:

Baupost isn't a L/S firm. They're a deep value/event-driven fund if you're looking for a style. Value investing principles like those in his book underpin his investment style but that doesn't mean he holds on to a company forever. He simply buys exceptional value when he sees it and sells it once it has returned to fair or better value (or proves to be a value trap). Most of the shorting the firm does is probably related to risk arbitrage trades.

Under this metric, would greenlight be a L/S firm because they short stocks? And would paulson advantage fund be considered deep value/event-driven?

I guess I'm just saying Baupost doesn't fit under your typical Jones model L/S definition which a lot of Tiger cubs seem to fall into. Greenlight doesn't either although they seem a little less eclectic than Baupost. Paulson is also pretty hard to categorize. They went from merger arb to a bit of everything although risk arb/distressed seems to be a big theme along with their big L/S plays (banking...).

Aug 23, 2011

I don't think I would put any type of label on Baupost, be it L/S, event driven, or deep value. He has consistently made money in different asset classes, being long or short, while holding a ton of cash. If I had to think of a name for Baupost's style it would be "Really Fucking Smart."

All of that being said, his two big buys last quarter were Microsoft and BP. I don't think I would call either of those even driven or deep value plays. They are cheap stocks with great cash flow. They are both out of favor and the markets may very well be excessively discounting them. I would consider both great value plays.

Sep 16, 2013

Can someone tell me why Klarman's book is $2,000 on amazon?

And/or where I can get a cheaper copy

Sep 17, 2013
Gene Parmesan:

Can someone tell me why Klarman's book is $2,000 on amazon?

And/or where I can get a cheaper copy

Save your 2K: http://www.my10000dollars.com/MS.pdf

Snootchie Bootchies

    • 1
Sep 16, 2013

There weren't many copies printed. And a little bird told me there might be a .pdf floating around in the seedy underbelly of the internet.

Sep 17, 2013

Zerohedge posted an article about baupost returning money recently. In the comment section someone posted a PDF link to the book. your welcome

Dec 18, 2015

Wow. That PDF is really easy to find. Good thing I didn't download it, which would be wrong.

Bumping this because we are currently buying something from Baupost and I know nothing about them. Does anyone have any insight? Sounds like a great shop.

LinkedIn profiles show an affinity for Morgan Stanley IB

I secretly wish our fund would take more of the Hedge Fund approach to websites. Give them a picture of a sailboat/city and a login, make them beg for more.

Dec 22, 2015
Gene Parmesan:

Bumping this because we are currently buying something from Baupost and I know nothing about them. Does anyone have any insight?

Yeah. Here's an insight: They bought the real estate asset in question based on (a deep discount to) replacement cost and you are buying based on (expensive) cap rates.

Guess which method makes more money with less risk?

EDIT: Just so you realize that I'm not an ass. This is from Sam Zell (hopefully you've heard of him, since you're doing real estate) last week.
http://globaleconomicanalysis.blogspot.com/2015/12...

I don't think that I've ever bought or sold real estate . . . I've sold real estate based on cap rates, I don't buy real estate based on cap rates. There's nothing more relevant than replacement cost. You can generate values that are way above replacement cost by virtue of very low cap rates, and that's a sucker's bet.

Dec 27, 2015

Good post and I don't disagree with you. We're actually buying at around 40% below replacement cost ($120 PSF) but Baupost snagged it a few years ago at like $90 PSF. They put some money in to it but haven't been able to do much on the leasing front

In his book Klarman consistently refers to being a Value Investor and not a Speculator. This consists of of three steps (as defined by Howard Marks):

(1) Decide on an accurate underlying value
(2) Pay less than that
(3) Don't be wrong

I mean, it's not super complicated.

Dec 27, 2015

If it isn't against any rules on this forum, I'd love to have it as well. Can someone pm it to me?

Dec 27, 2015
Dec 27, 2015

I've read some Klarman letters, and that is definitely not real. It reads nothing like him.

Dec 27, 2015

I think this is a version translated into another language and then translated back into English, using a pretty bad translation tool... It's not very illuminating.

Dec 27, 2015

yeah -- don't think that Seth's seminal work is called "Allowance of Refuge" as the site says, lolll

Dec 27, 2015

If somebody did, then what ? How are you gonna send handwritten notes, anyways ?

Dec 27, 2015

xerox has this awesome machine that scans documents and automatically puts them into PDF

Dec 27, 2015
Gray Fox:

xerox has this awesome machine that scans documents and automatically puts them into PDF

that's sick! you must work at a pretty fancy place dood.

Dec 27, 2015
Gray Fox:

xerox has this awesome machine that scans documents and automatically puts them into PDF

haha owned...

Dec 27, 2015

I'm also interested in a baupost letter if anyone has one.

Dec 27, 2015

Must work at fuckin greenlight or somethin, it's almost like they knew xerox was making those way before anyone else did. Insider trading?

Dec 27, 2015

I have it

Find me Tiger Global's and I will do the trade

Dec 27, 2015

Anyone have Glenview? Always an interesting read. Don't have any fancy machines or letters to trade but could send cash via paypal.

Dec 27, 2015

You won't be able to find a new Baupost letter online because the team are very secretive and scour the internet. If they find a copy out there, they will request a takedown immediately. The only thing I have is the compilation of old notes.

Dec 27, 2015