When Seth Klarman speaks, investors listen. Klarman runs Baupost Group, a Boston-based investment group that manages close to $23 billion in assets. He has made a living beating the market on a consistent basis. His fund beat the S&P by 6% yearly between 1983 and 2008, returning 16.5% a year to investors. More recently, Baupost has returned more than $6.5 billion in net profits since the beginning of 2009.

Klarman's most recent actions show it may be more difficult to accumulate those returns going forward. In a recent letter to shareholders he said, "Today, Baupost's opportunity set is smaller than it has been in some years, while our cash balances have grown."

Klarman is known to hold a lot of cash in his portfolio when he believes opportunities are scarce, but it is not very common to see a hedge fund return money on which it could be gaining a commission. However, that is just what he plans on doing. As a result of the market conditions, which he believes are not creating great investing opportunities, Klarman has decided to return 5% of Baupost's capital to investors by the end of the year.

Investors would be wise to take note of this investing legend's sentiment. If Klarman is having a hard time finding great investment opportunities, what are we mere mortal investors to do? While the number of opportunities may be small, according to Klarman, his portfolio allocation still allows investors to see some ideas he does like.

As of July 1, Baupost's largest positions were in ViaSat (Nasdaq: VSAT), Theravance (Nasdaq: THRX), and News Corp. (Nasdaq: NWSA), with nearly 25% of his stock allocation in ViaSat, a provider of satellite and wireless communication systems for the federal government as well as other businesses.

There have been significant opportunities to profit since the market began its incredible run in the beginning of September. However, with the anticipation of QE2 now out of the way, the focus again shifts to the economy. If unemployment and the economic outlook continue to improve, Klarman might finally underperform, but that is not something I am willing to bet on.

Andrew Bond owns no shares in the companies listed. Try any of our Foolish newsletters today, free for 30 days. The Fool has a disclosure policy.