Seth Klarman & Baupost Group: Hedge Fund Tracking - 13F Filing Q3 2008 ~ market folly

Monday, December 29, 2008

Seth Klarman & Baupost Group: Hedge Fund Tracking - 13F Filing Q3 2008

This is the 3rd Quarter 2008 edition of our ongoing hedge fund tracking series. Before reading this update, make sure you check out the preface to the series we're doing on Hedge Fund 13F's here.

Next up is Baupost Group ran by Seth Klarman. Klarman received his MBA from Harvard Business School and started working at Baupost at age 25. Over the past 25 years, Baupost has seen an annual compound return of 20% and is ranked 49th in Alpha's hedge fund rankings. Klarman has always considered himself a value investor and has been patient through the market turmoil. The past few years they have had nearly half their $14 billion in assets in cash. But, with turmoil comes opportunity. And, as such, Baupost's cash has been gradually deployed by Klarman and Baupost's 100 employees, leaving them with around a fourth of assets left in cash. Klarman's investment process is detailed in his book Margin of Safety. In it, he lays out a "how-to" on risk-averse value investing. The book is no longer actively printed and is very hard to find. His take on recent market action can be viewed in his recent interview with Harvard Business School. For more information about Klarman, check out our post on hedge fund manager interviews.

The following were their long equity, note, and options holdings as of September 30th, 2008 as filed with the SEC. All holdings are common stock unless otherwise denoted.

Some New Positions (Brand new positions that they initiated in the last quarter):
IAC Interactive (IACI)
RHI Entertainment (RHIE)
News Corp (NWS)
Acergy (ACGY)

Some Increased Positions (A few positions they already owned but added shares to)
Breitburn Energy (BBEP): Increased position by 838%
Linn Energy (LINE): Increased position by 140%
Alliance One (AOI): Increased position by 105%
Liberty Media (LMDIA): Increased position by 50%
Ituran (ITRN): Increased position by 34%
Exterran Holdings (EXH): Increased position by 28%
Centerplate (CVP): Increased position by 13%
Viasat (VSAT): Increased position by 10%

Some Reduced Positions (Some positions they sold some shares of - note not all sales listed)
UnitedHealth (UNH): Reduced position by 83% (CLA): Reduced position by 79%
Borders (BGP): Reduced position by 68%
Wellpoint (WLP): Reduced position by 63%
Horizon Lines (HRZ): Reduced position by 45%
NRDC Acquisition (NAQ): Reduced position by 35%
Prepaid Legal (PPD): Reduced position by 23%
Audiovox (VOXX): Reduced position by 12%
Triplecrown Acquisition (TCW): Reduced position by 10%

Removed Positions (Positions they sold out of completely)
Clearpoint Business (CPBR)
Overture Acquisition (NLX)
2020 ChinaCap (TTY)
Tremisis (TGY)
Seanergy Maritime (SHIP)
KBL Healthcare (KHA)
Victory Acquisition (VRY)
Interatlantic Financial (IAN)
TM Entertainment (TMI)
Golden Pond Healthcare (GPH)
Highlands Acquisition (HIA)
BPW Acquisition (BPW)
School Specialty (SCHS)
Coremark Holding (CORE)
Global BPO Services (OOO.U)
GSC Acquisition (GGA)
Liberty Acquisition (LIA)
Alternative Asset Management (AMV)
Hicks Acquisition (TOH)
Marathon Acquisition (inactive)
CapitalSource (CSE)
Global Consumer (GHC)

Top 20 Holdings (by % of portfolio)

  1. Linn Energy (LINE): 11.8% of portfolio
  2. Liberty Media (LMDIA): 9.2% of portfolio
  3. Domtar (UFS): 7.9% of portfolio
  4. Wellpoint (WLP): 7.3% of portfolio
  5. Exterran (EXH): 7.1% of portfolio
  6. Breitburn Energy (BBEP): 7.1% of portfolio
  7. Theravance (THRX): 6% of portfolio
  8. IAC Interactive (IACI): 4.7% of portfolio
  9. RHI Entertainment (RHIE): 4% of portfolio
  10. Sapphire Industrials (FYR): 3.7% of portfolio
  11. Syneron Medical (ELOS): 3.4% of portfolio
  12. Atlas Pipeline Partners (APL): 3.3% of portfolio
  13. Horizon Lines (HRZ): 2.9% of portfolio
  14. Viasat (VSAT): 2.2% of portfolio
  15. Alliance One (AOI): 1.8% of portfolio
  16. GHL Acquisition (GHQ): 1.6% of portfolio
  17. UnitedHealth (UNH): 1.5% of portfolio
  18. News Corp (NWS): 1.5% of portfolio
  19. Ituran (ITRN): 1.4% of portfolio
  20. Audiovox (VOXX): 1.4% of portfolio

Assets from the collective long US equity, options, and note holdings were $1.6 billion last quarter and were $1.3 billion this quarter. Baupost was selling out of nearly all of their acquisition holding company positions, which was interesting. Also, the additions they made to their positions in Linn Energy and Breitburn Energy were pretty substantial. Please note that we have not detailed changes to every single position in this update, but we have covered all the major moves. Also, keep in mind that these filings only include long equity, notes, and options holdings. They do not reflect their cash, short portions, or holdings in other markets (currency, commodities, debt, foreign markets, etc). This is just one of many funds in our hedge fund tracking series in which we're tracking 35+ prominent funds. The other funds we've already covered include:

Overall, its been one of the worst years ever for hedge funds, as we noted in our new November hedge fund performance number update. Thus, the recent moves they've made in their portfolios become all the more interesting given the way the market has played out.

More on Klarman / Baupost:
- Seth Klarman's book: Margin of Safety
- Prominent Hedge Fund manager interviews
- Klarman's interview with Harvard business school
- Hedge Fund investor letters
- Hedge Fund Rankings
- November hedge fund performance numbers
- October hedge fund performance numbers

blog comments powered by Disqus