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11/26/2014

Hedge-Fund World's One-Man Wealth Machine - WSJ

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MARKETS

Hedge-Fund World's One-Man Wealth Machine


David Abrams Built His Fortune Effectively Going It Alone
By ROB COPELAND
June 2, 2014 6:30 p.m. ET

In the Back Bay neighborhood of Boston, one man is


building a moneymaking machine that rivals some of the
hedge-fund industry's biggest names.
Calls to his office go unreturned even from those eager to
fork over eight-figure sums, potential investors say. One
industry veteran referred to him as "a unicorn," as few
people have ever seen him.
The hedge-fund manager, David Abrams, has personally
become a billionaire, and earned billions more for his
wealthy investors, over the past five years running what is
effectively a one-man shop, according to company and
investor documents reviewed by The Wall Street Journal
and people who have worked with him. His firm, Abrams
Capital Management LP, manages nearly $8 billion across
three funds and is discussing raising money for a fourth
fund that could help push its assets past $10 billion.

David Abrams of Abrams Capital Abrams Capital

More on MoneyBeat
Billionaire Stays in Shadows

In an era of star investors who appear regularly on


television and talk up their ideas at hyped confabs, Mr.
Abrams, 53 years old, has never spoken at an event open
to the public.
"He probably would have preferred you not find him," said
Roger Brown, president of Berklee College of Music,
where Mr. Abrams is a trustee.
Abrams Capital's main funds have posted an average
annualized return of about 15% since its founding in 1999,
documents show, nearly double the average for hedge
funds tracked by HFR Inc. and triple the S&P 500 index,

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11/26/2014

Hedge-Fund World's One-Man Wealth Machine - WSJ

including dividends.
WSJ's Rob Copeland profiles David Abrams, the
hedge-fund world's one-man wealth machine, whose
main funds have averaged a 15% annualized return
over the past 15 years. Photo: Abrams Capital.

The firm invests in a relatively small number of beaten-down companies at a time, mostly through stocks
at present, though it has also dipped into some of the more-talked-about fixed-income deals of recent
years, including the unwinding of bankrupt Enron Corp. Among its recent stockholdings have been
bookseller Barnes & Noble Inc., retailer J.C. Penney Co. and money-transfer firm Western Union Co.,
securities filings and investor documents show.
Mr. Abrams also is among the small group of investors that has taken a big bet on governmentcontrolled mortgage companies Fannie Mae and Freddie Mac, wagering that the Obama
administration's plan to wind down and replace the entities will fail, according to investor documents.
The Boston Billionaire
David Abrams has earned billions for his wealthy
investors.

Graduated from University of Pennsylvania as


history major
Protg of hedge-fund manager Seth Klarman

The firm employs three analysts and a small back-office


staff, but Mr. Abrams approves all trades personally,
according to people that have worked with him. Other firms
of comparable assets can have hundreds of employees.
He also built his fortune with the equivalent of one hand

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Hedge-Fund World's One-Man Wealth Machine - WSJ

Started Abrams Capital Management in 1999


after leaving Klarman's firm
Returns from main fund have tripled returns of
S&P 500 in 15 years
Jazz fan

tied behind his back: His firm uses no leverage, or


borrowed money, and often sits on billions in cash. It
currently holds about 40% of its $8 billion under
management in cash, investor updates show.

Part owner of the National Football League's


Oakland Raiders

Mr. Abrams got his start in 1988 at Baupost Group LLC,


also based in Boston. Run by Seth Klarman, Baupost is
one of the world's largest hedge-fund firms, with $27 billion under management.
The two remain friends, and Mr. Klarman's personal foundation has put money into Abrams Capital's
funds. Mr. Klarman described his protg as "smart as a whip."
"He loves a good puzzle and a good treasure hunt," Mr. Klarman said.
People who have worked with him said the University of Pennsylvania graduate who majored in history
is introverted and cerebral. The son of a stockbroker and psychotherapist and a father of two, he is an
avid follower of jazz music and fan of the band Earth, Wind and Fire.
Like Mr. Klarman, Mr. Abrams is known to be patient to the extreme. He will sit on a static portfolio for
months without making a move.
Investors in the firm, including institutions like Brandeis University, with an endowment of about $700
million, sometimes get scant information. Mr. Abrams's most recent quarterly letter consists of just six
paragraphs, one of which is a single sentence.
"He's not going to waste a nanosecond to impress you, or convince you, or argue with you," said Mr.
Brown of Berklee. "He knows what he thinks and if you ask him, he'll tell you. If you don't, he might just
sit there in silence."
Mr. Abrams likely collected more than $400 million last year on the back of a 23% return for one of his
main funds, according to Journal calculations based on his fees, performance and his personal
investment in the firm. He doesn't appear on lists of top-paid hedge-fund managers because his
performance figures are so closely guarded, but his estimated compensation last year would have put
him ahead of David Einhorn, Daniel Och and even Mr. Klarman, according to industry publication
Institutional Investor's Alpha.
A portion of his earnings came from a private-equity-style vehicle, which doesn't pay out gains until it is
unwound, and a handful of firm executives may have shared a small slice of his payday. The hedge
funds were up an additional 2% in the first quarter, investor documents show.
As a side gig, in 2007 Mr. Abrams was part of a group that bought a 20% stake in the National Football
League's Oakland Raiders. Forbes estimates the team's worth at $825 million, the NFL's least valuable
team. Before the purchase, he wasn't a big football fan but views the team as a distressed investment, a
person close to him said. The person said Mr. Abrams prefers to play squash at the University Club of
Boston.
Write to Rob Copeland at rob.copeland@wsj.com
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