WORTH SUPPORTING
Bullish on Cornell, with no strings attached
Beth and Seth 79 Klarman See larger image
People who study the career of Seth Klarman '79 -- iconoclastic hedge fund manager and philanthropist -- immediately realize two things.
First, he chooses his investments very, very carefully. Second, when the crowd is stampeding in one direction, he usually goes the other way.
It's a formula that has worked wonders in the 30 years since he left Cornell with a degree in economics. As CEO of The Baupost Group, Klarman has grown his business to more than $16 billion today from $27 million of invested funds in 1982, while delivering net annual returns approaching 20 percent for his investors.
Equally impressive, Baupost has protected capital well during the financial market crisis of the past 18 months.
In the bubbling economy of 2006, when exuberant investors were heaping money into the markets, Klarman held nearly half of his fund's assets in cash. In his annual letter to investors, he gave a simple rationale: The market was so flooded with money that bargains were hard to come by.
When the bubble burst, Klarman and his investors were able to watch from a position of relative safety -- and to resume bargain hunting.
Now, just as philanthropists nationwide are pulling back, the Klarman Family Foundation is pushing forward with a substantial investment in Cornell. The foundation has committed $5 million over the next five years to provide budget relief from the continuing economic crisis.
Unusual for a gift of this magnitude, it comes with absolutely no strings attached.
"Cornell played an important role in my life, and I am in a position to do my part to help Cornell through a difficult time. I have great respect and admiration for [President] David Skorton and trust that he will utilize our gift to have the greatest impact on Cornell," notes Klarman.
Skorton has indicated the money will go toward critical initiatives, including expanded financial aid for undergraduates.
"This gift is remarkable for so many reasons," Skorton says. "It is a tremendous vote of confidence in the leadership of the university, and it will give us flexibility to preserve our most important priorities in the face of drastic cuts. It is our responsibility to use this gift for the maximum good, and we will."
Prior to their current gift, Klarman and his wife, Beth, endowed two Cornell Tradition fellowships in honor of Seth's parents. They also have been generous supporters of Cornell Hillel for many years.
"The great universities in America are crown jewels that we must not allow to be tarnished. We cannot afford to cut back on faculty or financial aid, so all of us must do what we can to lead Cornell through the financial crisis," says Klarman.
Philanthropy has always been a family affair for the Klarmans. They work together on choosing nonprofits to support with their time, their leadership and through giving.
The Boston-based Klarman Family Foundation's funding addresses a variety of issues ranging from education and health to fighting anti-Semitism and anti-Zionism.
"I have been very fortunate since my years at Cornell," notes Klarman. "We all have a responsibility to leave the institutions that have influenced us stronger than when we found them. This seemed a perfect moment to step up to make a difference for Cornell."