Seth Klarman's Baupost has built its reputation on buying assets cheaply. The firm has also gained a reputation for buying esoteric debt and assets at cents on the dollar, taking on trades other firms cannot follow or copy.
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Klarman's decision to acquire the debt of bankrupt investment bank Lehman Brothers was one of his most well-known esoteric trades.
After the bank declared bankruptcy, the bonds' price fell below 10 cents on the dollar, but by 2018, recoveries had reached a little under 50 cents. Baupost, which had once allocated 20% of its assets to Lehman's distressed debt, has booked enormous returns on the trade.
Baupost...
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