In Larson He Trusts

Jeff Larson is back at work, which is saying something. In July 2007, the Boston hedge fund manager lost $1.5 billion in a matter of days, and it seemed he might never sell a security again. Larson’s crucial misstep: He bought corporate bonds on margin, meaning he borrowed a lot of money in an effort to buy even more bonds. But the bonds tanked when the credit market froze last year, and though Larson’s move didn’t wipe out his investors, he did have to close his firm, Sowood Capital; fire 90 employees; and give up his Back Bay offices. "A loss of this magnitude is as devastating to us as it is to you," he said in an apologetic conference call with his clients, which included Harvard University, the Boston Foundation, and the state pension system.

Larson spent the following months talking to people who had survived—or avoided—similar financial calamity, and decided a little disaster shouldn’t scare him away from the field he loves, according to a person from Larson’s inner circle. In May he quietly opened a firm called Larson/Kelleher Capital with a far more modest stature than Sowood’s: It’s just him, a partner, and six employees in a one-room office in Wellesley. He manages his own money now, along with that of some close partners—a sum a source pegs at between $50 million and $100 million, far less than the $3 billion–plus from endowments, foundations, and pension plans that he had invested at Sowood. And this time, he’s not borrowing anything.

Like most of those in his business, Larson doesn’t talk to the press. But when Reuters reported this July he was "leaving no stone unturned" in pursuit of investors in the new firm, Larson was furious, the insider says. Rather, Larson is focusing on his work, not marketing himself. "He just wishes people would stop paying attention to him," the insider says.

That’s not likely to happen, but his peers do seem to be watching with sympathy. Jonathon Jacobson, who worked with Larson at Harvard and now manages his own $12 billion fund, says Larson impressed people by the way he ended things at Sowood: meeting with investors, finding new jobs for his employees. "Most others would have attempted to stay in business. Had Jeff done so, his investors likely would have been completely wiped out," Jacobson says. "You really see the measure of a man when the chips are down." Larson’s job now is to show he can still make the smart bets.

  • Bobby

    I am in extreme disagreement with your fawning treatment of Jeff Larson. Mr Larson and his greedy ilk have put the country at the brink of a disaster. He wasn't "unlucky", he took wild chances with someone else's money and made drastically wrong decisions. Rather than laud his return, I think you should be outraged he's going to have an opportunity to do it again. Laissez-faire got us in trouble, please don't help it continue.

  • John

    After reading Bobby Keigan's comments it's quite clear to me that he does not have a grasp of the what Sowood was or what is happening in this current economic crisis. I think it is comical that you state Laron's Sowood put the country at the brink of disaster. Perhaps you should graduate high school before you comment next time.

  • John

    After reading Bobby Keigan's comments it's quite clear to me that he does not have a grasp of the what Sowood was or what is happening in this current economic crisis. I think it is comical that you state Laron's Sowood put the country at the brink of disaster. Perhaps you should graduate high school before you comment next time.

  • Bobby

    I'm glad you're finding comedy in the current finacial situation. Mr Larson wiped out $1.5 billion of other people'e money by taking wild risks, and he did it long before the present crash. If you would read closer, I include Larson with the rest of the unreined gamblers who put the country where it is now. If you're a product of the education system, I want to give my diplomas back.

  • Bobby

    On reflection, I would say that your statements epitomize the arrogant mentality of the financial industry – we're the only ones who know anything. If you guys are so smart, how did you put us in this situation? Good job!!!