When billionaire investor Seth Klarman and his wife Beth signed the Giving Pledge in 2013, they’d already been giving through their Klarman Family Foundation for over two decades. But even now, though it probably sounds like a tired cliché for readers following affluent mega-donors, there’s a good chance that the Klarmans are still just getting warmed up.
From 2018 through 2022, the couple disbursed $376 million through the foundation, which has four priority areas: advancing understanding of the biological basis of health and illness, ensuring a healthy democracy, expanding access to vital services and enrichment opportunities, and supporting the global Jewish community and Israel.
A good portion of the Klarman Family Foundation’s funding comes in the form of unrestricted support, and a closer look at the numbers suggests that the amount of money moving out the door, particularly to organizations in the democracy space, equals or exceeds that of some of the foundation’s more well-known legacy peers. The Klarman Family Foundation (KFF) also supports underfunded fields like eating disorder science, children’s mental health and music education for youth.
“Life’s unpredictable journey will undoubtedly expose us to additional worthwhile areas that we will consider exploring,” the Klarmans wrote in their Giving Pledge letter. “Our current expectation is that within the constraints of the vagaries of fate, we will spend down most of our philanthropic assets in our lifetimes.”
Here’s an overview of how the Klarmans conduct their philanthropy, with a focus on recent giving through the Klarman Family Foundation.
“The Oracle of Boston”
Seth Klarman, 67, is the CEO and portfolio manager of the Baupost Group, a Boston-based hedge fund that had $27.4 billion under management as of March 2023. Forbes pegs his real-time net worth at $1.3 billion.
Klarman graduated magna cum laude in economics with a minor in history from Cornell University and received an MBA from Harvard Business School. A proponent of value investing — his book, “Margin of Safety: Risk-Averse Value Investing Strategies for the Thoughtful Investor,” sells for about $3,000 (used!) on Amazon — Klarman has been compared to a like-minded investor and mega-giver, Warren Buffett, and he’s even earned the nickname “The Oracle of Boston.”
The Klarmans are big patrons of Seth’s alma maters. According to Cornell University’s magazine Ezra, their support includes endowing two Cornell Tradition fellowships, providing funding to Cornell Hillel and an unrestricted five-year $5 million commitment that the school announced in 2009.
Three years later, the Harvard Gazette reported that KFF made a $32.5 million grant to the Broad Institute at Harvard and MIT, where Seth sits on the board of directors, to support a collaborative effort to determine how human cells are wired. Then, in 2014, Harvard announced that the Klarmans made a naming gift for Klarman Hall, a conference center and performance space that opened in 2018 (and is not to be confused with Cornell’s Klarman Hall). While the Harvard press release didn’t mention a dollar amount, a 2021 article in Key Executives put the figure at $120 million.
Political headwinds are not at all irrelevant to the ongoing saga of the Klarmans’ higher ed giving. Last fall, as I’ve written, Seth and other prominent Harvard alumni signed an open letter to the school’s leadership criticizing officials for failing to ensure the safety of Jewish students amid post-October 7 protests on campus.
But though he’s positioned himself alongside some major Republican donors in those culture wars, Seth Klarman himself has almost exclusively swung against Trump’s GOP in his own political donations – which have been extensive – since 2016. This cycle, the vast majority of his political spending (around $3 million) has flowed to the Republican Accountability PAC, which describes itself as “Republicans and conservatives who hate what Donald Trump has done to the Republican Party.”
“A greater urgency to current funding”
Though the Klarman Family Foundation declined to comment for this piece, if we return for a moment to the Klarmans’ Giving Pledge, there are several aspects of their letter worth noting.
On one hand, they wrote that they “believe it is actually harder to give money away well than it is to generate it in the first place,” one of the main reasons why, according to many financial advisors and philanthropy consultants, many affluent individuals give away a relatively small percentage of their wealth. The Klarmans also said they “strive to be collaborative, responsive, and opportunistic in our approach to giving, while remaining realistic about the number of things we can truly improve through our support.”
At the same time, they also made the striking observation that “society’s problems seem to be compounding as fast as or faster than wealth can compound, suggesting a greater urgency to current funding.” While the Klarmans were only speaking for themselves, it’s a succinct and persuasive call for other funders to interrogate whether current outlays are commensurate with the challenges confronting grantee partners and their communities.
In that same vein, in 2020, the couple joined other major donors, foundations and academics in signing on to the Initiative to Accelerate Charitable Giving, an effort launched in part by Boston College Law Professor Ray Madoff and billionaire philanthropist John Arnold that aims to “promote greater and more accountable charitable giving.”
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Where the money’s going
According to an analysis of the Klarman Family Foundation’s Form 990s, it had a robust five-year average annual payout ratio of 8.5% from 2018 to 2022.
We can attribute this figure, which comfortably exceeds the 5% threshold set by the IRS, to Seth’s $296 million in total contributions during this five-year period. KFF isn’t unique in this regard, as donors who helm private foundations frequently make periodic contributions of cash, stocks, or real estate that enable them to eclipse 5% without jeopardizing perpetuity.
According to the foundation’s most recently available 2022 Form 990, it had $781 million in net end-of-year assets and disbursed 328 grants, totaling $86.3 million. The majority went to Boston-area organizations.
Thirty-four million dollars in grants fell under its Healthy Democracy category. To put this figure in perspective, the Carnegie Corporation of New York moved approximately $20 million in democracy funding across the previous two fiscal years. A lot’s possible, philanthropically speaking, when a billionaire comes to believe democracy’s in danger.
The two largest grants disbursed in 2022, each totaling $5 million, were in the Healthy Democracy category. They went to the Pew Charitable Trusts for its Election Trust Initiative and the New Venture Fund for its Voter Engagement Fund.
This support finds the Klarmans seeking to bring historically underrepresented demographics off the sidelines by moving big grants through two of the space’s more established channels. “I’m concerned that democracy can easily be taken for granted by those who have not had to fight to secure it,” Klarman told Key Executives in 2021.
At $20.3 million, the second-largest category at KFF in 2022 was its Good Philanthropic Citizen and Community Grants. Support flowed to Massachusetts-based organizations focused on basic needs, ensuring access to high-quality health care and building social cohesion, among other areas.
Add it up, and the foundation bucketed 39% of total grant funding into Healthy Democracy and 24% into Good Philanthropic Citizen and Community Grants in 2022. Other categories included Medical and Scientific Research ($8.4 million), Climate ($6 million), Arab Israel Employment and Education ($5.9 million), Children’s Mental Health ($5.2 million), Funder Collaborations and Bold Bets ($1.6 million), Music Pathways for Youth ($1.9 million) and Connections to Israel ($1.7 million).
Plugging funding gaps
Giving in some of these categories might seem like small change next to KFF’s mainline funding, but we shouldn’t underestimate its potential for impact. Back in 2017, IP’s Paul Karon looked at KFF’s support for eating disorder science, an area of study that has historically received tepid funding from grantmakers. “This is another good example of a funder getting a lot of leverage from their grant dollars by zeroing in on a niche where new money can make a big difference,” Karon wrote at the time.
Karon’s analysis loomed large as I considered KFF’s 2022 outlays for its Children’s Mental Health and Music Pathways for Youth categories. On the surface, the funding totals — $5.2 million and $1.9 million, respectively — don’t leap off the screen, but context is everything in philanthropy.
A recurring theme in my colleague Connie Matthiessen’s reporting is funders’ inadequate support in response to an unrelenting mental health crisis. The deficit is particularly acute as it applies to children and teenagers. In light of this trend, I suspect KFF’s $5.2 million in children’s mental health funding in 2022, most of which is earmarked as unrestricted, has had a much-needed impact for its 23 Boston-based grantees and the children they support.
I’d also wager that the foundation has generated a compelling important return on the $1.9 million it channeled to the field of children’s music education, which is often the first line item on schools’ budgetary chopping block.
On the climate front, in 2022, KFF joined twelve other major climate funders to create a new collaborative called Forest, People, Climate, with the goal of mobilizing $2 billion over the following five years to end tropical deforestation and kickstart sustainable development. In June, IP’s Michael Kavate reported that the initiative had secured $780 million in commitments.
The foundation’s website includes a contact form and telephone number, which isn’t always the case for foundations helmed by living donors. It reviews proposals primarily on a by-invitation-only basis, although one-time grants through its Community Capital Fund, which support the development, improvement or ownership of physical assets, are made through an open application process.
