Hedge Funds: Hedge Fund Gains from Wildfires Bet

Prominent hedge fund Baupost Group received over $3 billion in July from its bet on insurance claims.  These claims were targeted against PG&E Corp. which was connected to California wildfires.  Baupost Group saw a massive profit from this buyout.  According to Bloomberg, Baupost bought some of the claims for 35 cents on the dollar, yielding a $1 billion profit.  

Essentially, Baupost received insurance claims from the wildfires at a discount as part of a subrogation claim.  The California wildfires hit PG&E particularly hard, leading the company to enter bankruptcy in 2019 due to destroyed equipment.  The fires also took a toll on the environment, killing more than 100 people in addition to destroying many structures.  

As a claim holder, Baupost reached a deal last year with insurers which brought in $11 billion for the fund.  

Baupost Group is a hedge fund based in Boston.  Seth Klarman founded the fund and currently runs the company.  Baupost has $28.9 billion in assets under management as of 2019.