Baupost hedge fund plans to return some money: sources
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 Robertson.
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 $2.4 trillion.
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.
(Editing by Richard Valdmanis and Nick Zieminski)