We have some highlights of the Baupost 2017 letter on Hedge Fund Alpha – since the site just launched we posted here although you really should get our newsletter and check out the other site – also many will ask – also please do not email our staff asking us for copies of the material we are unable to send and therefore will not. Anyway here are links to five articles we have on the topic and with a brief excerpt though on an issue which is not my expertise but seems a bit bubbly – the company known as Softbank and the VC firm known as Sequioa (no relation to SEQUX)
Seth Klarman comments in Baupost 2017 letter to investors the following on the controversial company.
Capital poured into higher-risk venture investments at an accelerated pace in 2017. Japan’s SoftBank, owner of nearly 30% of Alibaba, the Chinese e-commerce company, announced the formation in late 2016 of its $100 billion Vision Fund to make technology investments. SoftBank itself would contribute t0 $28 billion, with the rest coming from other deep pockets, including the sovereign wealth funds of Saudi Arabia and Abu Dhabi, as well as Apple. SoftBank later indicated that a second larger fund was under consideration. Sequoia Capital announced plans to raise a new $5 billion fund, the largest ever assembled by a US venture capital firm. Vast amounts of money relentlessly pouring into high-tech investments inevitably portends the loss of investment discipline in the sector. We have seen this movie before.
Those are Klarman’s words as part of his overall bearish worries about the world.
This movie before I would guess refers specifically to the tech bubble of the late 1990s, but could apply to any bubble.
But that is not all: Combine the above with political risk, Chinese debt and the Fed removing the punch-bowl, and? It is time to be cautious, the bears (and Klarman here) would argue
Below readers can find more of our coverage on Baupost 2017 letter
Klarman On
the danger of Chinese leverage
Discipline while value investing in bubby times
Do you think Klarman is right about the current market or wrong? Let us know in the comments section!
