Yesterday it was Seth Klarman's Baupost [2], today it is David Tepper's Appaloosa Managament which is set to return between $1.5 and $2 billion. As reported by II Alpha, Tepper’s firm will return up to $2 billion in an effort to keep the firm’s funds at an optimal size. However, unlike Baupost and various other hedge funds returning cash due to lack of investment opportunities or simply shutting down, "Appaloosa regularly gives back money to investors when it feels it is getting too big. This will be the third straight year Appaloosa has returned capital to investors. Over the years, Tepper has already returned about $8 billion to investors since starting the firm in 1993. The Pittsburgh native’s goal is to keep the fund size at levels he deems optimal at any given time."
More from Alpha [3]:
The firm now manages more than $20 billion. Tepper recently told Bloomberg Television he is up more than 40 percent gross this year. Last year Tepper made $2.2 billion — ranking first on Alpha’s Rich List for the second time in the past four years — after posting a net 30 percent gain.
At the start of 2013, Appaloosa was only the 25th largest hedge fund firm in the world. This is remarkable given that Tepper could probably be managing two to three times as much money if he wanted given that Appaloosa is probably the most successful hedge fund firm of all time among those not reliant on a black box or algorithms for trading. Since inception, it has posted a net annualized return of 28.44 percent.
What’s more, Tepper has bucked a common problem in the money management world, which is that firms’ returns often decline the more assets they manage. In the most recent five-year period, Appaloosa’s net return was even higher — 30.54 percent. And this does not include 2013, which looks to beat his long-term record. So it was no surprise that Tepper was recently inducted into the Alpha Hedge Fund Hall of Fame.
Naturally, if Tepper is correct as disclosed in his now quarterly appearances in various financial TV media, and PE multiples rise to 20x as a result of Bernanke's largesse, he will certainly be returning far more cash in the future.