Baupost Sees Financial Risk When Monetary Support Ends

Seth Klarman, the hedge-fund manager who runs Boston-based Baupost Group LLC, said risks to financial markets today are in some ways greater than they were before the 2008 crisis once governments around the world halt their aggressive stimulus.

“The real downside scenario -- which concerns us greatly - - involves the end of the ‘free lunch’ of large deficits, zero interest rates, and relentless quantitative easing,” Klarman wrote in a 19-page year-end letter to Baupost investors obtained by Bloomberg News. “This story line would take the form of a currency, sovereign, or economic crisis inciting panic throughout the financial markets.”