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Klar@man letter


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Its amusing how secretive this dude is. Its not like he's protecting valuable ideas anymore.

 

 

Most guys are so desperate to increase AUM that they are more than happy to have their letters out in the public domain where it might attract a few new dollars.  Klarman is funny about wanting to restrict his AUM.

 

 

SJ

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Not sure why this is secret:

 

Here's a summary

-They work very hard to find ideas

-Even when markets fall they're working hard

-A rough summary of what happened in the US news and culture in 2018

-A little political summary of 2018

-The world was great when Klarman was a kid in the good old days of six TV stations and "real" news

-Thanks to what he considers the best team in the world

 

That's it.  Oh and he went long PG&E before the fire and is just holding...

 

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I agree it was a fluff piece for the most part, but again that is what one should expect from an astute operator.  You want to give out just enough to make your clients feel good about their investment but not so much that your competitors can actually mimic your strategy. 

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Not sure why this is secret:

 

Here's a summary

-They work very hard to find ideas

-Even when markets fall they're working hard

-A rough summary of what happened in the US news and culture in 2018

-A little political summary of 2018

-The world was great when Klarman was a kid in the good old days of six TV stations and "real" news

-Thanks to what he considers the best team in the world

 

That's it.  Oh and he went long PG&E before the fire and is just holding...

 

Good summary.

 

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I agree it was a fluff piece for the most part, but again that is what one should expect from an astute operator.  You want to give out just enough to make your clients feel good about their investment but not so much that your competitors can actually mimic your strategy.

 

I doubt anyone is looking to mimic his strategy right now. I think the secrecy at this point is about getting attention. He saw it did wonders for the value of his book. Which like his strategy, is nothing special.

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I doubt anyone is looking to mimic his strategy right now. I think the secrecy at this point is about getting attention. He saw it did wonders for the value of his book. Which like his strategy, is nothing special.

 

That's possible.  Hard for me to say though as I don't really know what he does...

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according to this its 16.2% since inception. Though I'd imagine it's lower since last 2018 was basically flat

 

https://www.fool.com/investing/2017/12/05/this-famous-value-investor-is-betting-on-an-amc-en.aspx

 

From my recollection, he underperformed S&P 500 from inception through 1999 but anyone can feel free to correct that if I'm wrong.

 

So, it looks like the 16.2% is as of the end of 2015.

 

He had a "high single digit return in 2016, a "mid single digit return in 2017 and "a roughly breakeven and a decline of less than one percent for the year ended December 31."

 

So the numbers are now less than 16.2 since the last 3 years are quite a bit less than that.

 

 

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16.2% since inception.

 

That sounds like an extremely impressive number for what I understand is a multi-billion dollar fully-hedged cigar butt flipping fund...

 

It's a solid record. I think it's especially solid given that he holds large amounts of cash and his risk aversion. The overall performance numbers (strictly speaking on performance) are good but not crazy good.

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I doubt anyone is looking to mimic his strategy right now. I think the secrecy at this point is about getting attention. He saw it did wonders for the value of his book. Which like his strategy, is nothing special.

 

I have to admit... it was a really good book.  He wrote something that was Ben Graham meets Howard Marks letters and meets David Dreman next...

 

But, with Howard Marks stuff out now, his topics and concepts are covered very well.

 

 

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16.2% since inception.

 

That sounds like an extremely impressive number for what I understand is a multi-billion dollar fully-hedged cigar butt flipping fund...

 

It's a solid record. I think it's especially solid given that he holds large amounts of cash and his risk aversion. The overall performance numbers (strictly speaking on performance) are good but not crazy good.

 

I believe it's lower now.

 

I know someone who had the numbers.  He made the majority of his returns in 2002-2003 and in 2008.

 

He killed it during crashes, but outside of that it's been middling.  I'm not really sure they're a cigar butt fund either.  I know they're heavy into debt, and heavy into private investments.

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I agree Nate. The 16.2% was at the end of 2015 it looks like.

 

The last 3 years were a good amount below that. I'd guess it's probably in the mid/ low 15% now. I'm not sure if this is net or gross returns though.

 

Not exactly the best time to return funds:

 

https://www.businessinsider.com/seth-klarman-baupost-group-to-return-capital-2010-11

 

I'd love to know what his returns were when he manages small amounts vs large.

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The fact that they’ve done very well during market crashes is probably a big reason why their institutional clients love them: their returns are uncorrelated (or even negatively correlated) with other major asset classes.  My reading is that most of these investors would happily invest in such a fund even with okay-ish long term expected returns.  So if you can do that and get ~15%, I imagine you’re golden.

 

But again, that’s all about running a fund as a business.  There are probably easier & better ways to invest if you’re just managing your own capital…

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