Seth Klarman

Seth Andrew Klarman (born May 21, 1957) is an American billionaire investor, hedge fund manager, and author.

He is a proponent of value investing.

Klarman was born on May 21, 1957, in New York City from a Jewish family.

When he was six, he moved to the Mt. Washington area of Baltimore, Maryland, near the Pimlico Race Course.

His father, Herbert E. Klarman, was a public health economist at Johns Hopkins University and his mother was a psychiatric social worker His parents divorced shortly after their moving to Baltimore.

When he was four years old, he redecorated his room to match a retail store putting price tags on all of his belongings and gave an oral presentation to his fifth-grade class about the logistics of buying a stock.

As he grew older, he had a variety of small-time business ventures including a paper route, a snow cone stand, a snow shoveling business, and sold stamp-coin collections on the weekends.

When he was 10 years old he purchased his first stock, one share of Johnson & Johnson (the stock split three-for-one and over time tripled his initial investment).

His reasoning behind buying a share of Johnson & Johnson was that he had used a lot of band-aids (a product of the company) during his earlier years.

At age 12 he was regularly calling his broker to get stock quotes.

Klarman attended Cornell University in Ithaca, New York, and was interested in majoring in mathematics but instead chose to pursue economics.

He graduated magna cum laude in economics with a minor in history in 1979.

He was a member of the Delta Chi fraternity.

In the summer of his junior year, he interned at the Mutual Shares fund and was introduced to Max Heine and Michael Price.

After graduating from college, he went back to the company to work for 18 months before deciding to go to business school.

He went on to attend Harvard Business School where he was a Baker Scholar and was classmates with Jeffrey Immelt, Steve Burke, Stephen Mandel, James Long, and Jamie Dimon.

He is the chief executive and portfolio manager of the Baupost Group, a Boston-based private investment partnership he founded in 1982.

He closely follows the investment philosophy of Benjamin Graham and is known for buying unpopular assets while they are undervalued, seeking a margin of safety and profiting from any rise in price.

Since his fund's $27 million-dollar inception in 1982, he has realized a 20% compounded return on investment.

He manages $30 billion in assets.

After graduating from business school in 1982, he founded the Baupost Group with Harvard Professor William J. Poorvu and partners Howard H. Stevenson, Jordan Baruch and Isaac Auerbach.

The name is an acronym based on the founders' names (the name was decided on before Klarman joined the project).

Poorvu asked Klarman and his associates to manage some money he had raised from the selling of his share in a local television station and the fund was started with US$27 million in startup capital.

His starting salary was $35,000 a year, considered low to alternative job offers, and he later recalled that the other founders "were taking a big risk on a relatively inexperienced person."

Early on in his investment career, he used to badger Goldman Sachs salesmen with so many questions regarding their options and thoughts on the markets that they were afraid to pick up the phone if they saw that Baupost was calling.

In 2008, he was inducted into Institutional Investor Alpha's Hedge Fund Manager Hall of Fame.

In February 2008, Klarman was alerted that a London-based hedge fund, Peloton Partners, were forced to liquidate more than a billion dollars worth of their assets, he decided to open up his fund to new investors subsequently raising $4 billion in capital, mainly from large foundations and Ivy League endowments.

He believed that there was serious market opportunity for value investors in the coming months and after the collapse of AIG and Lehman Brothers, he invested heavily in the equity markets, sometimes buying $100 million in stocks and other assets per day.

While the market was down due to the aftermath of the crisis, he purchased many distressed securities and bonds.

By early 2009, after JPMorgan Chase acquired Washington Mutual as a part of their deal with the United States Department of the Treasury, Sallie Mae bonds were returning double digit figures for Baupost.

Overall, Klarman's bond position appreciated 25%, however, during the financial crisis, his fund returned -7% to -13%.

Although many hedge funds faced negative returns and low performance during the crisis and its aftermath, Klarman saw increased equity positions and described it as a "fortuitous time" for the fund's capital gains.

The same year he would go on to buy a minority share in the Boston Red Sox, via a stake in Ed Eskandarian.

In 2009, Klarman began buying distressed credits in the wake of the financial crisis of 2007–2008.

He purchased the bonds of CIT Group, a financial holding company based in New York City at 65 cents on the dollar with a yield rate of 15%.

After the company went into prepared bankruptcy, as Baupost began lending it money via a loan, Carl Icahn gave a loan of $6 billion to the CIT Group but backed out of the deal a week later.

This caused the bonds to speed into prepared bankruptcy and gave the Baupost group securities valued at 80 cents to the dollar for their debt in CIT Group.

Shortly after the CIT deal was finalized, Klarman amassed a stake in a new bio-tech company called FacetBiotech, at an average cost of $9 a share.

Forbes listed his personal fortune at US$1.50 billion and said he was the 15th highest earning hedge fund manager in the world in 2017.

He has drawn numerous comparisons to fellow value investor Warren Buffett, and akin to Buffett's notation as the "Oracle of Omaha," Klarman has been called the "Oracle of Boston."