Seth Klarman: Born to Invest
Often compared to the “Oracle of Omaha,” Warren Buffett, Seth Klarman is sometimes referred to as the “Oracle of Boston.” The fact of the matter, however, is that Mr. Klarman is a financial whale in his own right, with a story as compelling as any on Wall Street.
Born on May 21,
Thus, it is understandable when people say that Seth Klarman has economics in his blood: by all accounts, he was born with an enormous talent for investing. Seth’s interest in finance continued into his college years, as he earned his B.A. in economics, magna cum laude, from Cornell University in 1979 and an M.B.A. from Harvard Business School in 1982.
Interestingly, his classmates at Harvard included financial luminaries Jamie Dimon, Jeffrey Immelt, Steve Burke, and Stephen Mandel. During the summer of his junior year at Cornell, Mr. Klarman launched his career by accepting an internship position with Mutual Shares Corporation. After graduating from Harvard, Seth co-founded The Baupost Group, a Boston-based firm.
The firm was founded with $27 million in start-up capital, and Seth Klarman’s starting salary at The Baupost Group was a mere $35,000 a year. Seth was relatively inexperienced compared to his partners at The Baupost Group, but his Benjamin Graham-based value-investing approach would earn him a sterling reputation in the financial community, along with robust long-term profits for his fund’s clients.
His 1991 book on conservative value investing, Margin of Safety, was out of print for many years, and copies of it have sold for as much as $2,000 (though evidently electronic copies are available for much less than that nowadays. The book is considered a value-investing classic, and it details Seth Klarman’s extremely patient and disciplined approach, which sometimes involves sitting on cash until there is a mispricing in the markets.
Mr. Klarman’s disciplined approach has undisputedly paid off. With a gross return of 20% per year and just one negative year since its founding in 1982, The Baupost Group has achieved iconic status. Currently serving as The Baupost Group’s CEO, Seth Klarman manages one of the largest hedge funds in the world, with $32 billion of assets under management.
Much of Seth Klarman’s net worth of $1.5 billion is donated to charitable causes, often through his Klarman Family Foundation. This organization supports a variety of causes, including advancing understanding of the biological basis of health and illness, expanding access to vital services and enrichment opportunities in Greater Boston, and ensuring a healthy democracy.
So yes, we can discern multiple parallels between The Oracles Omaha and Boston: an early start in finance, tremendous talent for value investing, superior long-term returns, massive donations to charitable causes... but this is not a tale of two whales. From child prodigy to