NEW YORK/BOSTON, Jan 29 (Reuters) - Billionaire investor Seth Klarman, whose Baupost Group hedge fund ranks among the world’s largest and most admired, told clients he lost money last year, in part because bets on energy companies failed to pay off.
In a client letter seen by Reuters, Klarman wrote the fund posted a “a mid-single-digit decline” for 2015 and said he would give investors more details in early February.
Klarman also warned that there could be a bubble in the venture capital world were investors have happily sent billions into so-called unicorn firms, privately owned tech companies valued at over $1 billion.
Klarman, who has run the Boston-based fund since 1982, had $31 billion in assets under management at the end of 2014, according to the most recent information available from government filings the private fund made.
A spokeswoman for Baupost did not immediately respond to a request for comment.
Klarman said that he is sticking by the bets on Cheniere Energy Inc and Pioneer Natural Resources Co which tumbled in 2015 and started 2016 with fresh losses.
“Last year, we were challenged when short sellers publicly targeted two of our larger stock holdings,” Klarman wrote in the 21-page letter regarding Cheniere and Pioneer. Klarman said his team did more research and concluded they should stick by their original idea to buy the stock.
Klarman is one of the best known so-called value investors in the mold of icon Warren Buffett, who finds good companies that are undervalued.
But his way of picking winners did not work in 2015. “Bottom-up bargain hunting - which requires fastidious research, endless patience, pattern-recognition skills derived from hard-won experience, and the application of sound judgment - didn’t prove profitable for us last year.”
The average hedge fund lost 1 percent last year but some big-name investors, including Greenlight Capital and Pershing Square Capital Management, nursed double-digit losses.
Klarman said his bets on publicly traded companies generated losses of about 6.7 percent, which is different than the unspecified total loss posted by the firm.
The fund lost 2.7 percent on Cheniere, 1.2 percent on Micron Technology Inc, 0.6 percent on Keryx Biopharmaceuticals Inc and 0.6 percent on Antero Resources Corp.
While public bets lost money, Baupost’s private holdings posted “strong” results, the letter said.
The letter was first reported by Business Insider. (Reporting by Lawrence Delevingne and Svea Herbst-Bayliss; Editing by Lisa Shumaker)