Klarman Continued, and the Power Equation

When I wrote Chief Investment Officer’s last cover story on whether secretive hedge fund manager Seth Klarman would buy his own prized book, I thought I’d gotten to the root of who had originally owned my copy, bought for $1,600 on Amazon: S. Ray Miller, an industrialist and car collector from Elkhart, Indiana, who had penned his initials in the otherwise pristine copy.

I was wrong. I hadn’t sourced the book to its roots. There was more.

Two days after we published the article online, I received an email—one of many, thank you all—from a reader in Indianapolis. It said:

I enjoyed your article and in particular noted your search of the author. The book could have been purchased for him by Frank Martin, a money manager in the Elkhart area. I know for sure that he bought copies of this book for his clients when it was first published, though I have no idea if this person was a client. Just a little comment that I thought might interest you.

It did. What were the chances that a value investor from Elkhart had bought multiple virgin copies of Klarman’s Margin of Safety and not had S. Ray Miller as a client? Had I missed the original step in the chain?

As I said in the article, I had gone too far down the rabbit hole to not keep going.

I emailed Frank Martin, who still works in the business. He called me back. A genial man who himself has published books on value investing, Martin was rightly coy about whether S. Ray Miller was a client. Of our very pleasant 30-minute phone call, I’ll say only that Martin would not officially confirm nor deny that Miller had been a client before his death in 2003—but I am confident the story of my book, and how it got into Miller’s hands, is settled.

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In July, I was on a ferry between Hvar and Dubrovnik, Croatia (if you haven’t been, go). As happens in the final quarter of my vacations, I began to think about work.

Chief Investment Officer’s annual ranking of the world’s 100 most powerful asset owners was approaching, and needed freshening up. In the past, we’ve simply ranked the Power 100 members from #1 to #100 after extensive internal discussions and external consultations. It was a fun and thorough process, but it was informal. Why not formalize it?

The rough version, sketched on a scrap piece of paper on the ferry, identified five main factors adding up to power in this industry: innovation, collaboration, talent development, fund size, and tenure. Many tweaks later—the result of working with executive recruiters and other industry insiders—we produced our new equation for power: Those five factors, weighted differently, would total scores that could theoretically reach 100. The higher the score, the higher the ranking on the 2015 Power 100.

After endless hours of debate, consultation with those recruiters and insiders, gossip, and healthy argument, the scores are in. We graded hard. The top score of any asset owner on earth is 82 out of 100. Who is it? View the full list to find out.