A recent article in Institutional Investor reveals that “doubts have begun to percolate within the elite investor class” about Seth Klarman’s iconic hedge fund Baupost Group.

The article quotes one investor who claims, “Seth is running Baupost more like a wealthy person might run their personal money than like the aggressive hedge fund manager that he’s been over the years. He has pretty considerable net worth and all of his money invested in that firm. Other people’s fees are paying for him to run his personal money.” The investor adds, “Even though we have terribly high regard for Seth, this isn’t what we want,” noting a slip in performance and a departure from the consistent, thoughtful investment process the firm has shown for decades.

According to the article, that opinion is shared by ten “knowledgeable institutional and family office investors that II interviewed, agreeing to anonymity so they could speak freely.”

One investor, who was presented with the opportunity to invest with Baupost for the first time, said “I can’t believe I’m saying this, but I am passing on Seth Klarman,” adding that after reviewing the firm’s numbers, they concluded that the investment would not be worth the “headache and the lockup of capital” which is longer than usual among hedge funds. 

The article quotes a current Baupost client who predicts that the firm’s fate will play out over the next five to ten years: “If there is a distressed cycle and they make good use of it, they’ll be twice as big in ten years. If things continue as they are, they’ll leak assets and be half the size, a quarter of the size in five years.”