While hardly as spectacular as Hugh Hendry's supernova flameout, or the far more boring, slow motion conversion of the assorted other famous and less famous bears, a legendary hedge fund titan has decided he too has no use for excess capital in this broken market. No surprise then that Institutional Investors' Alpha reports that Baupost's Seth Klarman is returning $4 billion in capital to investors for only the second time in its history due to "a lack of investment opportunities." And watching how the epic farce that Bernanke's wealth effect known as the Stalingrad & Poorski trades in the last 30 minutes of every day nobody can blame him. And no, Klarman is not returning cash due to some hidden underperformance: "Baupost’s many partnerships were up 13 percent, on average, through the September quarter. Its annualized return since inception is in the high teens." This happens to push it in the top decile of all hedge funds in 2013.
Yet despite the exercise of the redemption put, Baupost, which at the end of 2013 had $26.7 billion in AUM making it the 7th largest hedge fund in the world, still will have a ton of both capital and dry powder.
When it completes the capital distribution, firm-wide assets will likely be more than $25 billion, according to a source. Earlier this year we reported the firm’s goal is to keep assets at $25 billion.
This is only the second time in the hedge fund firm’s 31-year history that it is returning money to investors. The previous time was in 2010, and Baupost subsequently raised money in early 2011.
At the end of 2012, Baupost had nearly $26.7 billion under management, making it the seventh-largest hedge fund firm in the world, according to the most recent annual Institutional Investor’s Alpha ranking of the world’s 100 largest hedge fund firms.
The good news: the trickle down from Mr. Chairwoman's policies to the E-trade babies still left fighting for bid/ask scraps in this "market" with the vacuum tube HFT armies is sure to have a happy ending.