CEO & Portfolio Manager, Baupost Group
Value Investing Legend Seth Klarman: Masters in Business
Barry sits down with Warren Buffett disciple Seth Klarman, CEO of Baupost Group, a Boston-based investment manager with a multi-strategy approach. They discuss Seth's start as a 25 year-old and journey to CEO. They also discuss his approach to risk, IPOs, and sectors along with his sports passions including a smaller ownership in the Boston Red Sox, horse racing, and his feelings about the Boston Celtics' 2026 season.
Chapters:
00:00:00 - Masters of Business Begins
00:01:09 - Education and Early Career
00:33:14 - Investing in Real Estate
00:44:44 - Understanding IPOs
00:54:08 - Sports...
About Seth Klarman
Seth Klarman, CEO and portfolio manager of Baupost Group, appeared on multiple Bloomberg and CNBC programs in 2026 to discuss his investment approach and views on markets. In a series of interviews with Barry Ritholtz, Klarman described his firm's evolution from a focus on public equities into a multi-strategy approach encompassing distressed credit, private investments, and real estate. He stated that Baupost's team is structured as generalists who can work across asset classes. Klarman also discussed his minority ownership in the Boston Red Sox and his interest in horse racing. In a March 2026 appearance at Global Alts New York with CNBC's Sara Eisen, Klarman said the current market "has characteristics of a bubble," citing an optimistic tone around new technologies. He expressed concern about U.S. debt reaching 100% of GDP and said the country is "taken less seriously" overseas due to policy reversals and the unresolved conflict with Iran. Klarman identified assisted living commercial real estate as Baupost's "favorite single idea," noting the sector is recovering from post-COVID bankruptcies. He described AI as a technology of "potential game-changing magnitude" that has forced him to add more time to stay current, but also warned that large IPOs from companies like OpenAI and Anthropic could create supply-demand imbalances that soften prices.
Transcript (56 segments)
✨ AI-enhanced transcript with speaker attribution
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Barry Ritholtz0:00
What can I tell you about this week's banger? Seth Klarman, legendary value investor, out of Boston at the Baupost Group. What a fascinating discussion about risk, the current environment, the Boston Red Sox, and anything that affects portfolios, distressed assets, stocks, bonds, real estate. I thought this was fascinating, and I know you will too. With no further ado, my conversation with Seth Klarman.
Seth Klarman, welcome to Bloomberg. It's so great to be here.
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Seth Klarman0:46
Thank you, Barry.
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Barry Ritholtz0:47
Thank you so much. I've been looking forward to this for forever. Before we get into your investment philosophy and the development of Baupost, let's roll back to your early days. Economics from Cornell, an MBA from Harvard. What was the original career plan?
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Seth Klarman1:06
I was always drawn to investing, even as a young kid interested in baseball statistics. I became aware of stock market columns, asked my neighbor, and started following it from an early age. I didn't have a career plan, but I was drawn to puzzles—the stock market and financial markets are big puzzles to solve. How does it all work, and how can an investor outperform? That drew me in.
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Barry Ritholtz2:11
How did you first find that beyond the newspaper pages? You grew up in Baltimore, parents divorced young. Mom was an English teacher and social worker; Dad a health economist. Was it just thumbing through the sports pages to the stock pages?
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Seth Klarman2:40
The numbers on the page attracted my attention. My origin story is like many in investing—I was drawn to small businesses to make money. I had a newspaper route, snow cone stand, mowed lawns, raked leaves, shoveled snow, and sold candy at religious school for arbitrage profit. It was a pattern of being drawn to small business and making money, which led to an interest in the stock market. I bought my first stock with bar mitzvah money at around ten years old—a share of Johnson & Johnson.
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Barry Ritholtz4:04
Let's fast forward to the Baupost origin story. You co-founded Baupost at 25, but reality is you were brought in to manage money for the founding families. That's shocking at 25—letting a kid run their portfolio.
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Seth Klarman4:31
I'd wonder the same in their seats. I don't think people should generally start investment firms at 25. The firm was being created by four clients who wanted an institutional structure to manage money well in a highly volatile time in the early 80s with stagflation and uncertainty. They wanted to keep money intact and managed properly. I was a student at business school, and my real estate professor, Bill Poorvu, was part of selling a TV station. They had $27 million, and my job was to figure out smart things to do with the money.
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Barry Ritholtz6:26
Eventually, you became the lead partner and CEO. How did that happen?
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Seth Klarman6:32
I wasn't CEO for the first seven years. I became CEO and effectively got control through a handshake deal—working hard and doing well for clients would earn me a stake. I started with no stake and ended up with over half, but now much less because I believe in sharing with my team.
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Barry Ritholtz7:07
Let's talk about timing. You mentioned turmoil and stagflation in the previous 16 years. Inflation-adjusted returns were down 75% from 66 to 82. 1982 was the beginning of a historic bull market. How did that affect your thinking on risk and opportunities? What did the markets look and feel like in 1982?
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Seth Klarman7:42
Malcolm Gladwell might say 1982 was an interesting time to start a firm with wind at your back. But at the time, you had no idea it was a long bull market. The market hadn't done well for a long time, and people were skeptical. You can always point to things that seem overvalued or risky, yet we get through most of those. It didn't feel like a layup. We tried to make money apart from the market by buying idiosyncratic situations and bottom-up mispricing, which built our record. We would have done okay whether the market was up, down, or sideways.
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Barry Ritholtz9:25
How did the environment of high rates under Volcker, and the malaise from Vietnam and Watergate, affect you as a professional investor? What lessons did you take?
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Seth Klarman9:33
Every investor needs to be a student of history—it may not repeat exactly, but it rhymes. Understanding financial history is valuable. What were the worst moments? How did we go through the 1929 crash and Great Depression? Even Benjamin Graham nearly went broke twice. Investors should hold multiple inconsistent thoughts: finding interesting opportunities today while knowing there are backdrops like expensive markets or euphoric conditions. Over 40 years, it's always been some of both. Value investors make money staying bottom-up—portfolio of bargains stress-tested and intellectually honest will probably do okay.
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Barry Ritholtz11:25
You mentioned Ben Graham. Who else influenced your investment philosophy? I've read about Michael Price and Max Heine.
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Seth Klarman11:45
Ben Graham was a major influence, as he has been on everyone in value investing. Warren Buffett, as a real-life practitioner, also influenced me. It was heartening to see someone like Buffett think similarly about downside risk, focusing on individual companies, not worrying about the overall market, and holding cash. He gave me certainty of compounding capital over time. Graham and Dodd is a North Star—focus on what something is worth, ignore the herd, growth at any price, and new technologies. Confidence in holding something worth more later underpins value investing.
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Barry Ritholtz13:51
You mentioned downside risk. In 1991, at 34, you published Margin of Safety on risk management. What led to writing the book? How was it initially received, as it's now sought after?
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Seth Klarman14:22
In retrospect, it looks presumptuous. A classmate at Harper Collins asked me to write it after seeing my client letters. I thought I was updating The Intelligent Investor with modern examples to make it more accessible. Writing it made me think more clearly about what I do—I write to figure out what I think. The initial reception was mixed: a handful of value geeks bought it, but it landed with a thud due to lack of advertising. I bought back copies, but it developed a cult following. Competitors used it to train their teams, which wasn't the goal, but it was successful in a weird way. We've reprinted it for clients and interns.
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Barry Ritholtz20:00
Let's talk about the 2008-09 financial crisis. You raised about $4 billion and deployed $100 million a day into distressed assets. Are those numbers accurate?
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Seth Klarman20:32
That's ballpark. We had been closed for new clients but kept a list. When the market fell apart after Bear Stearns and Lehman, with great stress and uncertainty of an economic decline, it was time to take capital. The odds of deploying fruitfully increased daily. The team worked heroically, raising significant capital within a quarter.
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Barry Ritholtz21:55
How did you put this team together, and what were their marching orders during the turmoil?
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Seth Klarman22:18
We were an established firm with a team in place, deeply knowledgeable and experienced in distressed assets. People at Baupost like being versatile athletes—nimble, agile, and cross-trained. Like baseball teams, we have people who can work on distressed situations, private investments, public markets. They call them in when busy.
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Barry Ritholtz23:17
Big chunk of capital aggressively deployed when many were paralyzed. Was it just the value framework, or broader?
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Seth Klarman23:35
It wasn't like coming in with giant satchels of money. It was the same cerebral, methodical process. We saw things at lower prices, looked at fundamentals, everything bottom-up. We bought bonds at 70 covered at par, mortgage securities, corporate debt like auto finance arms, and pieces from Lehman's capital structure. We stress-tested investments—if the world got worse, would this be okay? If downside is protected and many paths to winning, we're interested. We also owned equities and private investments. The challenge is not blowing up and having capacity to buy when opportunities arise and competitors are sidelined.
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Barry Ritholtz26:18
I'm fascinated by the tension between bottom-up research and top-down. You say you don't think top-down, but panic and distressed assets were over-responding to the top-down environment.
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Seth Klarman26:56
There are several layers. People responded to redemption requests, credit downgrades, and forced selling. You never want to be a force seller; you want to buy from them. Like mountain climbing, you look bottom-up for the right trail and equipment, but also have top-down view for weather. I always think about whether the environment is safe—markets feel stretched, but on the brink of unprecedented technology and prosperity, with risks and change. Bottom-up still feels right, but keep an eye on the weather: GDP, national debt, inflation. We don't invest based on that; we notice a security mispriced and look closer.
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Barry Ritholtz29:12
Let's talk about cash. Many see it as a drag, but it's been important for you. What optionality does it create versus career pressure to stay fully invested?
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Seth Klarman29:31
You're nailing it. Cash is valuable optionality. With a concentrated portfolio, when large positions come off, you can wait for something great. That's how we started—holding some cash until something great came along. But holding 30% cash was painful with suppressed rates and Fed money printing, as we haven't had a serious downturn in almost two decades. I wasn't optimizing for clients in a less volatile environment. We changed strategy: made liquid books more liquid, especially public equities, so we can pivot on a dime without needing as much cash. We think of benchmark as absolute return, not relative—we want to beat inflation by hundreds of basis points, not worry about the market.
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Barry Ritholtz33:05
How do you think about capital allocation across equities, distressed debt, real estate, and private investments? Percentage terms or opportunistic?
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Seth Klarman33:28
We came about these through experiences. Interesting private investments trickled in—injecting capital, buying portfolios, buying stakes at good multiples. By seeing opportunities bottom-up, we expanded beyond public equities. Distressed credit is a specialty; we have smart, patient people. We wait patiently and build versatile teams. The bottom-up approach lets us allocate capital better than top-down. We don't predict asset class returns; we see what's available. Real estate is interesting, with opportunities in assisted living due to aging population and distressed facilities. Private investments are opportunistic, with things trickling down as capital pulls back. We're opportunistic investors.
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Barry Ritholtz39:00
How do you think about the current environment—tariffs, inflation, Middle East war? Compartmentalized or input into fundamental values?
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Seth Klarman41:28
AI is a sea change. I'm not a tech guy, but I spend huge time staying current—I've never seen technology with this importance and potential. I read everything, listen to podcasts, consume information to avoid being behind. The team thinks about incorporating AI into processes and implications for portfolio companies. We have some long exposure in data centers at a discount, but mostly avoid AI losers and find ancillary exposure to winners. Tariffs and administration volatility are hard—deliberate distraction sometimes. Most investors need to note it but not get distracted, as most doesn't matter investment by investment. There's tremendous change, high volatility, with stock dispersion high but overall market volatility low.
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Barry Ritholtz44:29
Let's talk about the SpaceX IPO—a trillion-dollar valuation, tiny float, Nasdaq waiving rules. How do you perceive this in the market gestalt? Does it trouble you?
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Seth Klarman45:17
My compliance team says I can't talk about individual securities—we own no space assets. But I share your sense this is a bell that might ring at the top. It's an unprofitable company with enormous valuation. Goldman estimates growth needs to be huge to justify it. Investors might miss how much money is being sucked out: large IPOs, OpenAI and Anthropic coming, stuck private investments, endowments heavily weighted. There's demand for money—Google, Facebook, utilities, chip companies—so much supply of securities might soften prices.
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Barry Ritholtz47:40
Baupost has survived different regimes—inflation, bubbles, crises. Has anything changed since 1982? Do things moderate? What's the same and different?
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Seth Klarman48:28
Investors should be students of history. There are cycles—war and peace, inflation and deflation, debt becoming pernicious. At least as long as humans are in charge, we'll see cycles. Navigate by realizing you may not see the cycle clearly while in it, but know they exist. What seems true today won't be for all time. Diversify, take profits when things are expensive, buy when out of favor. Stay bottom-up, remember the weather, prepare for storms. Protect downside by deep analysis, knowing names, selling when up, finding senior securities, and macro hedging when volatilities are low.
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Barry Ritholtz51:00
We have a new Fed chair. You've been skeptical about Fed policy since the crisis. How do rates affect investors? Are rates normalized now?
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Seth Klarman51:28
I believe in responsibility for actions. The Fed taking rates to zero after the crisis was understandable to hold things together, but leaving them for an extra decade stoked speculation and disincentivized responsibility. We saw that in 2022 with SPACs, garbage companies, meme stocks blowing up. Today, we're speculating again in a more legitimate area like AI. We don't know the path with AI, AGI, unemployment, prosperity, or K-shaped economy. There's always uncertainty, but people pay high prices as if the future is predictable, which it isn't.
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Barry Ritholtz53:43
You're a big Boston guy and fan of sports. What do you think of sports these days—the Celtics, basketball? What do you like?
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Seth Klarman54:09
My biggest sports passions are baseball—I'm a small owner in the Red Sox—and horse racing, with some high-quality thoroughbreds. The Celtics season was disappointing; they played well early but chemistry suffered when Jayson Tatum returned, and they bowed out when he got hurt. Sports is great for uniting Americans of all types, a great equalizer and unifier. It serves positive purposes in society. Baseball this year is in small numbers, but statistics mean reversion eventually catches up. Baseball always surprises you—it's a perplexing game with perpetual adjustments between offense and defense.
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Barry Ritholtz57:20
You famously kept a low profile in a publicity-rewarding business. Was that strategic? Why be more public now?
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Seth Klarman57:45
I'm more introvert than extrovert, so I don't seek TV or papers. Much of our work is better off without everyone copying investments—accumulating stock is easier without attention. We're not reckless; everyone knows where we are and our team members. You just don't see me on TV all the time. I don't know why that's bad.
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Barry Ritholtz58:28
Beyond investing, you and your wife are active philanthropists. How do you think about philanthropy and capital allocation?
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Seth Klarman58:46
On our third date, my wife asked what I hope for in life. I said if I provide for family and have resources beyond, I want to give back—fundamentally how I was raised. It's both a privilege and responsibility. I've always worked to make money to give away. It keeps me focused—I love investing as a puzzle, but love knowing success helps charity. Charity is a calling; the world is broken with problems from climate change to poor education to challenges to democracy. I'm grateful for American opportunities and want everyone to have the same chance. The American dream is broken for many, and we need to restore it. Our philanthropy goes into science, democracy, healthcare, universities, music instruments for kids, and refurbishing civic centers in small towns—like a value investor seeing opportunity.
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Barry Ritholtz1:02:06
Let's jump to our favored questions. Starting with: who are your mentors? Who helped shape your career?
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Seth Klarman1:02:13
I worked for Max Heine and Michael Price at Mutual Shares right out of college—incredible years. They've been great friends and mentors. Warren Buffett, whom I knew later, inspired me through his annual reports and letters, teaching about quality companies. I also developed mentors who were peers—Richard Perry, Frank Rosen, Paul Singer. Finding kindred spirits enriches and makes us wiser.
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Barry Ritholtz1:03:34
Let's talk about books. You're a big reader. What are you reading now, and what are some favorites?
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Seth Klarman1:03:41
I'm finishing Lloyd Blankfein's memoir and reading Michael Pollan's latest on consciousness—plants are more conscious than you think. I love history; Battle Cry of Freedom about the Civil War is a favorite. I read widely: The Red Queen on evolutionary biology, fiction, biography, memoir across the board.
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Barry Ritholtz1:04:27
You mentioned podcasts. What are you listening to, watching, or streaming these days?
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Seth Klarman1:04:35
My favorite streaming is a golden age of TV. We loved Pitt—the Pittsburgh General Hospital ER series—remarkable with Noah Wyle and a great cast. We also loved Shrinking.
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Barry Ritholtz1:04:59
Final two questions. What advice would you give to a recent college grad interested in investing?
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Seth Klarman1:05:08
Go somewhere you'd want your capital invested—if you wouldn't put your money there, don't go. Don't be afraid to go out of favor. Two years ago, biotech was hitting lows; now it's on fire. It pays to be contrarian, find mentors, go where they're patient and won't expect immediate profits. That's where you build a career and learn.
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Barry Ritholtz1:05:57
Final question: What do you know about markets, risk, investing today that would have been useful to know 40 plus years ago?
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Seth Klarman1:06:09
I wish I knew the importance of the economic engine that Silicon Valley is—American creativity and ingenuity. It's why I worry about threats to democracy, the ability to try, fail, innovate. Startups unleash brilliant people, driving economic outperformance. Israel has a mini version, but it hardly exists elsewhere. I wish I'd understood it better; I would have owned venture capital in my foundation and recommended institutional diversification into it. As a value investor, I wasn't focused enough on the engine that is venture capital.
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Barry Ritholtz1:07:46
Fascinating. Seth, thank you for being generous with your time. We have been speaking with Seth Klarman. If you enjoy this conversation, check out any of the 651 we've done over 12 years. You can find them at Apple iTunes, Spotify, Bloomberg, YouTube. I'd be remiss not to thank the crack team: Alexis Noriega, video producer; Sean Russo, researcher; Luke, podcast producer. I'm Barry Ritholtz. You've been listening to Masters in Business on Bloomberg Radio.