In a significant restructuring of its real estate and equities divisions, Seth Klarman’s Baupost Group has cut approximately 19% of its investing staff, the largest staffing in the hedge fund’s 42-year history, according to a report by Bloomberg.
The report cites a letter sent to investors on Thursday as revealing that the layoffs were distributed evenly across the real estate and equities units and impacted 11 of the firm’s 59 investing personnel. The restructuring is aimed at allowing Baupost to focus its investments more narrowly within these sectors while increasing its exposure to distressed debt, special situations, event-driven equities, private investments, and capital solutions.
“This is where we expect to find the most compelling investments,” Klarman stated in the letter.
The restructured real estate team, led by partner Nick Azrack, will now concentrate on properties with broken capital structures, distressed debt, or asset repositionings, marking a departure from the firm’s previous broad investment strategy in real estate. On the equities side, Baupost concluded that it had an excess of analysts and thus opted to reduce staff.
“Ultimately, we believe a more opportunistic approach to real estate will lead to the best outcomes,” Klarman wrote. “Our public equity team is focusing our efforts on event-driven situations and value dislocations.”
Klarman noted that Baupost has already exited several long-standing positions and initiated new ones as part of this strategic pivot.
Currently, equities constitute 21% of Baupost’s portfolio, while real estate accounts for about 14%, according to sources familiar with the matter.
The hedge fund’s previous significant job cuts occurred in late 2020 when it closed its London office with the loss of eight employees.
