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- A hedge-fund billionaire nicknamed the “Oracle of Boston” for his similarities to Warren Buffett is hoarding cash and warning the bull run won’t last.
- “The rocket fuel that has propelled markets in 2019 will run out,” Baupost boss Seth Klarman wrote in his annual letter to investors, according to Bloomberg.
- Cash made up 31% of Baupost’s portfolio at the end of December, Klarman said.
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An investor nicknamed the “Oracle of Boston” for his similarities to Warren Buffett is hoarding cash and warning the bull run won’t last.
“The rocket fuel that has propelled markets in 2019 will run out,” Seth Klarman wrote in his annual letter to investors last week, according to Bloomberg, which reviewed a copy.
The billionaire boss of Baupost Group – a Boston-based hedge fund that manages about $30 billion in assets – highlighted low interest rates and limited volatility as key drivers of the current bull market.
Baupost made a return of less than 10% in 2019, Klarman told his investors. He blamed “conservative positioning, the continuing underperformance of value equities, the persistence of a generally lackluster opportunity set, and a few mistakes,” Bloomberg said.
Cash made up 31% of Baupost’s portfolio at the end of December, Klarman said. Buffett has taken a similar approach: His Berkshire Hathaway conglomerate held a record $128 billion in cash at the end of September, as the famed value investor continued to hunt for “elephant-sized” acquisitions but balked at sky-high prices.
In contrast, Ray Dalio – the boss of Bridgewater Associates, the world’s biggest hedge fund – proclaimed that “cash is trash” at the World Economic Forum in Davos, Switzerland this week. He warned the value of hard currency would be eroded by a weakening dollar and rising money supply in the coming years.
Klarman’s last letter – which sounded the alarm on mounting social tensions, mushrooming government debt, and diminishing American leadership – sparked discussion at Davos last year, The New York Times reported.