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Livewire Exclusive: Klarman, Buffett, and Beating the Market

Reading through Patrick Poke’s article yesterday analysing Seth Klarman’s annual letter for Baupost Group (“Klarman: A Buying Opportunity”), a particular passage stood out. Unsurprisingly, not least because of our history in championing the strategy, the passage focused on reducing correlation to broader equity markets.

In our most recent Livewire article, “The Little Known Buffett Strategy”, we drew attention to a 1988 Berkshire Hathaway Annual Letter detailing Buffett’s engagement in the practice of arbitrage as a means of providing superior risk-adjusted returns to cash in the absence of compelling investment ideas. In Buffett’s case, engaging in arbitrage tempered desires to chase equity investments for the sake of performance when long term investments weren’t sufficiently compelling.

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