| BOSTON, Sept 24
BOSTON, Sept 24 Seth Klarman's $28 billion
Baupost Group, one of the world's biggest hedge funds, plans to
return some money to clients at year's end, two people familiar
with the Boston-based firm's plans said.
It would be only the second time in Klarman's 31 years of
running Baupost that he is giving money back, and the reason is
that it is getting tougher to put all of the cash to work, the
sources, who asked not to be named, said.
They did not say how much money would be returned.
Klarman is not alone in trimming or restricting the size of
his fund, with other hedge fund managers also having trouble
picking winners in a record-high market fueled by a U.S. Federal
Reserve 'easy money policy' that could end.
The Federal Reserve stunned financial markets last week by
maintaining the pace of bond purchases, countering expectations
of a modest adjustment that would have signaled the beginning of
the end of five years of ultra-easy monetary policy.
"What Seth Klarman's decision is communicating to me is that
he is saying the world has changed so much and that he is not
seeing the opportunity set anymore," said Mark Yusko, chief
investment officer at Morgan Creek Capital Management. "He's
saying I'm nervous."
Daniel Loeb's $13 billion Third Point LLC has long turned
away new investors, but now the firm, one of the year's best
performers, is not even replacing capital that leaves.
Similarly, Viking Global Investors is hard closed as are
Lone Pine Capital and Blue Ridge Capital, all funds whose
managers got their start with legendary investor Julian
Even relative newcomers like Keith Meister, who went out on
his own with Corvex Capital in 2011 after being Carl Icahn's
right-hand man, and Mick McGuire who left Bill Ackman's Pershing
Square Capital Management to launch Marcato Capital Management
in 2010 are turning new investors away.
The moves are coming at a time when more investors have been
turning to hedge funds as the safer, low volatility option in a
tough landscape, growing the overall global hedge fund assets to
Academic research has long shown that smaller and newer
funds tend to deliver larger returns than bigger and older
funds, in part because managers are more nimble and are often
willing to take bigger risks in their investments.
At smaller funds, a managers' personal capital also tends to
make up a bigger percentage of the whole fund, meaning he or she
shares a greater stake in the ups and downs.