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In the multistrategy firm's second-quarter letter to clients, firm president Jim Mooney warns of how low volatility can influence risk-taking and, by extension, leverage in potentially negative ways.
Seth Klarman, Baupost Group (photo credit: Daniel Acker/Bloomberg)
Like many hedge fund firms, the folks at Baupost Group are very concerned about the extremely low level of volatility in the markets.
This is a recurring theme sounded in a number of quarterly letters that are just starting to be sent by hedge fund firms to their clients. And while many equity fund managers -- especially those that just go long the big-name internet stocks that are driving the indexes -- are happy about the surging equity markets, Jim Mooney, who earlier this year was named president of Baupost, is not sharing their exuberance.
He devotes a significant amount of space to the potential...