Seth Klarman discussion at Goldman

[dcollon]

 

[Munger_Disciple]

I watched this interview, didn't find it all that useful to be honest. 

Edited July 28, 2025 by Munger_Disciple

[dcollon]

I agree Munger_Disciple, but I never know how many younger people are on this board that might not have heard much about Seth. 

[Munger_Disciple]

26 minutes ago, dcollon said:

I agree Munger_Disciple, but I never know how many younger people are on this board that might not have heard much about Seth. 

 

Sure thing. It's also a general comment; I found his interviews in the last 10 years to be somewhat boring. He just repeats the same boiler plate thing with no useful advice to general investing public. This is very much the opposite of Charlie (Munger) who was very interesting & gave useful advice to us "groupies" (as he called us) till the end. That's why Charlie is the  and is sorely missed. 

 

On a side note, I hear Seth is more interested in horse racing these days than investing.  

Edited July 28, 2025 by Munger_Disciple

[dwy000]

Klarmans returns have been pretty poor over the past 5-10 years from what I can find.  I cant tell if its law of large numbers, whether the markets have changed, whether he's lost his edge or what the issue is.  He used to be in the same stratosphere as Renaissance but not any more.  I wonder if there's a point where he just closes up the fund and either retires or plays for fun.

 

Edit: posted right as @munger_disciple was posting so some overlap and answers from him. 

Edited July 28, 2025 by dwy000

[Marco Van Basten]

18 minutes ago, dwy000 said:

Klarmans returns have been pretty poor over the past 5-10 years from what I can find.  I cant tell if its law of large numbers, whether the markets have changed, whether he's lost his edge or what the issue is.  He used to be in the same stratosphere as Renaissance but not any more.  I wonder if there's a point where he just closes up the fund and either retires or plays for fun.

 

Edit: posted right as @munger_disciple was posting so some overlap and answers from him. 

I think his returns have been quite poor for the past 15 years.  Look

a) the game became much harder.   I remember buying ASR in 2003 at 5x free cash flow and IBA at 2-4x net income, meanwhile cash exceeded market cap.  Things like Darling in 2003, AMNF in 2009, et cetera.  There were plenty of bargains like that in the late 1990s - early 2000s.  You generally don't find such opportunities anymore.  I think he just hoarded cash hoping for opportunities like that, and they never came. 

b) Also, I think analysis/paralysis got him and his firm (he alluded to it) in 2008-2009, 2018, 2020, 2022, April of 2025. 

c) Most of the gains in the last 10-15 came from owning a very small sliver of the stock market (Bessbinder claims that this has been the fact for a century) and he just didn't own any.  

d) His style was distressed debt, not buying great business cheaply and I remember in 1998-2004, we did not buy "bullet-proof" paper in distressed unless it was north of 10%, and unsecured where we would own the company potentially post bankruptcy at less than 25% IRR to resolution.  I don't think this exists anymore.  

[TwoCitiesCapital]

2 hours ago, Marco Van Basten said:

 

c) Most of the gains in the last 10-15 came from owning a very small sliver of the stock market (Bessbinder claims that this has been the fact for a century) and he just didn't own any.  

 

 

I don't remember the book I saw it in, but there was a study done that concluded the vast majority of individuals equities have NOT outperformed treasuries over long time horizons (like 20-30 years). 

 

Indices do as a result of survivorship bias and continuing to weight the survivor ever more higher than the losers. 

Edited July 28, 2025 by TwoCitiesCapital

[Marco Van Basten]

2 hours ago, TwoCitiesCapital said:

 

I don't remember the book I saw it in, but there was a study done that concluded the vast majority of individuals equities have NOT outperformed treasuries over long time horizons (like 20-30 years). 

 

Indices do as a result of survivorship bias and continuing to weight the survivor ever more higher than the losers. 

That's the study I refer to.  

[schin]

6 hours ago, Marco Van Basten said:

I think his returns have been quite poor for the past 15 years.  Look

a) the game became much harder.   I remember buying ASR in 2003 at 5x free cash flow and IBA at 2-4x net income, meanwhile cash exceeded market cap.  Things like Darling in 2003, AMNF in 2009, et cetera.  There were plenty of bargains like that in the late 1990s - early 2000s.  You generally don't find such opportunities anymore.  I think he just hoarded cash hoping for opportunities like that, and they never came. 

b) Also, I think analysis/paralysis got him and his firm (he alluded to it) in 2008-2009, 2018, 2020, 2022, April of 2025. 

c) Most of the gains in the last 10-15 came from owning a very small sliver of the stock market (Bessbinder claims that this has been the fact for a century) and he just didn't own any.  

d) His style was distressed debt, not buying great business cheaply and I remember in 1998-2004, we did not buy "bullet-proof" paper in distressed unless it was north of 10%, and unsecured where we would own the company potentially post bankruptcy at less than 25% IRR to resolution.  I don't think this exists anymore.  

 

I don't know of his performance figures.... but, being secretive is part of his mystic.  I loved his book, but his performance hasn't really supported his philosophy. I would expect him to outperform during 2008 (GFC), 2020 (COVID) and major disruptions, but that hasn't been the case.

[Peregrine]

I met with someone who worked at Baupost and he said that Klarman isn't really all that involved in the investment decision-making and hasn't been in a long time. His name gives Baupost the mystique and credibility, whether earned or not, but he's delegated investment decisions to a bunch of lieutenants.

[schin]

13 hours ago, Peregrine said:

I met with someone who worked at Baupost and he said that Klarman isn't really all that involved in the investment decision-making and hasn't been in a long time. His name gives Baupost the mystique and credibility, whether earned or not, but he's delegated investment decisions to a bunch of lieutenants.

 

It's almost like Bill Ruane at Sequoia. It was a different company and never as great. But, again, Klarman is happy with the lack of alpha, so be it. He's too busy with his horses and Red Sox games anyway.

[Peregrine]

16 hours ago, schin said:

 

It's almost like Bill Ruane at Sequoia. It was a different company and never as great. But, again, Klarman is happy with the lack of alpha, so be it. He's too busy with his horses and Red Sox games anyway.

 

Like it or not, success in the investment management business almost always comes down to building your own celebrity. It's an interesting psychological phenomenon how normal people - even intelligent ones - inherently trust highly visible people more. It's why FTX recruited so many celebrity spokespeople before spectacularly blowing up. Availability bias is just enormous.

[schin]

@Peregrine - True dat. At least, he's not as much of a lightning rod as Mohnish Pabrai and his performance. I think Pabrai might have better performance stats than Klarman.

[Peregrine]

20 hours ago, schin said:

@Peregrine - True dat. At least, he's not as much of a lightning rod as Mohnish Pabrai and his performance. I think Pabrai might have better performance stats than Klarman.

 

One thing I found interesting about Munger is how he allowed all these hanger-ons build their celebrity from their association with him. Buffett never allowed that but Munger kinda willingly did so or at the very least passively allowed it.

[schin]

21 minutes ago, Peregrine said:

 

One thing I found interesting about Munger is how he allowed all these hanger-ons build their celebrity from their association with him. Buffett never allowed that but Munger kinda willingly did so or at the very least passively allowed it.

 

@Peregrine - Munger never vouched for Pabrai or his performance. But, I know Munger invited him to events. Didn't know he associated with Klarman, but didn't have anything bad to say about him.

 

I kinda agree with your stance on Buffett. I felt he was influenced by lunches that people bought like Pabrai and Guy Spiers.. and of course, Ted and Todd, which he hired, but have been somewhat unimpressed.

[Peregrine]

On 7/31/2025 at 10:42 AM, schin said:

 

@Peregrine - Munger never vouched for Pabrai or his performance. But, I know Munger invited him to events. Didn't know he associated with Klarman, but didn't have anything bad to say about him.

 

I kinda agree with your stance on Buffett. I felt he was influenced by lunches that people bought like Pabrai and Guy Spiers.. and of course, Ted and Todd, which he hired, but have been somewhat unimpressed.

 

Munger, to me, had always been relatively lax in the kind of people that he associated with. He never vouched for people like Pabrai or Tilson but let them be associated with him in various ways. That connection, however peripheral, was used to help them gain a far bigger profile than they otherwise would've gotten. On the other hand, Buffett always seemed far more discerning about who he let in to his circle.

[Munger_Disciple]

57 minutes ago, Peregrine said:

 

Munger, to me, had always been relatively lax in the kind of people that he associated with. He never vouched for people like Pabrai or Tilson but let them be associated with him in various ways. That connection, however peripheral, was used to help them gain a far bigger profile than they otherwise would've gotten. On the other hand, Buffett always seemed far more discerning about who he let in to his circle.

 

You got it backwards here especially with respect to Pabrai. He bought Buffett charity lunch, a.k.a. "The Lunch". And then Buffett introduced him to Charlie in Los Angeles (Pabrai was living in Irvine, CA at that time). I believe Pabrai, Spier & others were regularly invited to the " Berkshire/Buffett Brunch" at the annual meetings for many years. 

Of course Charlie liked having groupies around (who doesn't?) but he never invested with Pabrai, Tilson or Spier. He only ever gave money to two outside managers in his life: Li Lu & an Australian-American fund manager.

Edited August 1, 2025 by Munger_Disciple

[Marco Van Basten]

1 hour ago, Munger_Disciple said:

 

You got it backwards here especially with respect to Pabrai. He bought Buffett charity lunch, a.k.a. "The Lunch". And then Buffett introduced him to Charlie in Los Angeles (Pabrai was living in Irvine, CA at that time). I believe Pabrai, Spier & others were regularly invited to the " Berkshire/Buffett Brunch" at the annual meetings for many years. 

Of course Charlie liked having groupies around (who doesn't?) but he never invested with Pabrai, Tilson or Spier. He only ever gave money to two outside managers in his life: Li Lu & an Australian-American fund manager.

Who is the Australian-American fund manager?  Thank you.

[Peregrine]

1 hour ago, Munger_Disciple said:

 

You got it backwards here especially with respect to Pabrai. He bought Buffett charity lunch, a.k.a. "The Lunch". And then Buffett introduced him to Charlie in Los Angeles (Pabrai was living in Irvine, CA at that time). I believe Pabrai, Spier & others were regularly invited to the " Berkshire/Buffett Brunch" at the annual meetings for many years. 

Of course Charlie liked having groupies around (who doesn't?) but he never invested with Pabrai, Tilson or Spier. He only ever gave money to two outside managers in his life: Li Lu & an Australian-American fund manager.

 

Various people have tried to build the Buffett connection through the lunch auction but none have any public connection to him outside of that. Meanwhile, Munger regularly met with people outside of any obligations and even developed friendships with them. Buffett in contrast hates when people try to "ride on his coattails".

 

Munger has invested with a lot more people than is publicly known. Li Lu's fund is just the most public of them.

[Munger_Disciple]

12 minutes ago, Peregrine said:

Munger has invested with a lot more people than is publicly known.

 

Please do inform us.

[Peregrine]

3 hours ago, Munger_Disciple said:

 

Please do inform us.

 

There’s a reason why it isn’t public. With that said, they’re relatively small commitments.

[schin]

8 hours ago, Marco Van Basten said:

Who is the Australian-American fund manager?  Thank you.

https://www.afr.com/markets/equity-markets/charlie-munger-invests-in-aussie-berkshire-hathaway-soulmate-20220606-p5arg7

[Munger_Disciple]

27 minutes ago, schin said:

https://www.afr.com/markets/equity-markets/charlie-munger-invests-in-aussie-berkshire-hathaway-soulmate-20220606-p5arg7

 

That's the one. cc: @Marco Van Basten

 

The only other (private) investment Munger had was in apartment buildings in the greater Los Angeles area managed by his friend Avi:

https://www.fa-mag.com/news/billionaire-charlie-munger-s-timely-apartment-bet-began-with-hebrew-bible-64218.html

Edited August 2, 2025 by Munger_Disciple