Action by governments and central bankers has convinced investors that risk “has simply vanished”, says value investor Seth Klarman, founder of the Baupost hedge fund, in his latest letter to investors, quoted in the Financial Times.
Klarman has long been a critic of the Federal Reserve’s loose monetary policies, which he believes have badly undermined “the market’s usual role in price discovery... With so much stimulus being deployed, trying to figure out if the economy is in recession is like trying to assess if you had a fever after you just took a large dose of aspirin”.
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That said, while Klarman may feel that the investment environment is hostile, his fund has still been putting money to work. In the third quarter of 2020, Baupost invested $400m in a “special purpose acquisition vehicle” (a cash shell, effectively) launched by fellow hedge-fund manager Bill Ackman, with the goal of investing in “mature unicorns” – private companies valued at between $10bn and $15bn.
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