In Baupost’s nearly 44 years of history, it has had just five down years, and the legendary Seth Klarman of Baupost has been the driving force. In an interview with CNBC’s Sara Eisen at the 2026 Global Alts New York, Klarman shares the secrets of their success and details on where they’re looking for value in the AI market.
Baupost’s secret sauce
In the beginning, they didn’t aim to grow an investment business. Instead, their mandate was to generate attractive returns with limited downside, said Klarman, who described this as their “driving force.”
To protect capital, the Baupost team:
- Focuses on downside as much as upside
- Does meticulous fundamental research on every company
- Holds cash in the absence of immediate opportunities
- Doesn’t leverage the portfolio at all
- Buys senior securities like debt for a structured investment in the private markets so that they’re structurally senior in much of what they do, protecting them on the downside.
- Does cross-asset macro hedges
Originally, Baupost was in just equities and credit, but over time, they got involved in commercial real estate during some of the “blips” in that business, realizing that commercial real estate is as big of a market as equities.
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