PayPal Founder Peter Thiel's Hedge Fund Blows Up
Bloomberg: Clarium Capital Management LLC, the hedge-fund firm run by PayPal co-founder Peter Thiel, slumped 18 percent in October, its biggest monthly decline, because of losses on bonds.
The firm's Clarium LP fund reported a year-to-date loss of about 3 percent, wiping out the 58 percent gain it made in the first half, according to estimates given to investors.
``Clarium is known for taking large risks, and their performance reflects that,'' said Patrik Safvenblad, head of hedge-fund research in Stockholm for DnB NOR ASA, Norway's biggest bank. ``Investors can get overly optimistic that periods of strong performance will continue''...
Clarium had 81 percent of its money in positions used by investors when they expect a widening spread, or gap, between bond yields, such as for 10-year Treasury notes and 30-year bonds. Instead, yield spreads narrowed in October. Armel Leslie, a spokesman for the San Francisco-based firm, declined to comment.
Thiel, who manages $5.2 billion, trades everything from stocks to commodities, seeking to profit from broad economic trends, a strategy known as macro investing.
How could Peter lose so much so fast? L-E-V-E-R-A-G-E. (What does that mean? Gambling. Wait, sorry. It means "borrowing a ton of money from your friends before you walk into the casino.")
Clarium borrowed $4.40 for every $1 in equity capital invested as of Oct. 31, compared with $3.90 for every $1 a week earlier, according to the investor letter.
Thiel, 41, started Clarium in 2002 after selling online- payments service PayPal to EBay Inc. for $1.5 billion. The hedge fund has gained more than fourfold since starting in 2002.
In the context of the rest of the hedge-fund industry and global capital markets, of course, the year-to-date results are just dandy. Still, a 40% loss in three months hurts.
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Photo Excerpt: New York Times
Not bad, not good.
I'm going to go out on a limb and say Q.4 will be an absolute blood bath.
Pete is more fiscally responsible than others (as if that'd be hard).
BTW: Do you know how many hedge funds collapsed on the back of that horror show VW trade Henry?
Sorry, don't know numbers on VW trade.
Of course, we're all being a little harsh here. Sure, you can't eat relative performance, but being down 3% ytd is still a heckuva lot better than how some other big swinging Dicks and Janes have been doing of late. Isn't Bridgewater down like 19%? and God knows what's going on with Fortress. If I was an investor, I'd keep my money in Clarium.
They're a macro fund so they usually don't have a whole lot of funds allocated to equities (as was obvious per their previous 13F's). But, it seems like they really moved out of commods and into stocks right before stocks cratered.
I have the utmost respect for Thiel and Clarium just because their numbers have been astonishing over their existence. They are a volatile fund, sure, but they have been able to still stay on a run of solid returns for the most part. Just a bit ironic that he likes to short anything that has to do with leverage, yet he was levered himself.
http://gregor.us/policy/for-energy-secretary-who-understands-oil/
Gregor
1) Fund is flat YTD
2) All macro funds are leveraged, which does not mean they are 'gambling'. These are just two different things (isn't that obvious??? I am wondering)
3) this product has always been very volatile, and a 40% DD (especially after a 70% gain...) is acceptable and consistent with the fund's risk porofile.
4) leverage means nothing in the context of a macro fund, at least from a risk perspective. What if the fund is long 3y govies against 4y govies 500% of equities? Does that sound risky to you?
Conclusion: Mr Blodget just does not understand what a macro fund is.
Just my personal opinion ... 3% dog year to date is not a blowout when the DJI average is down 32% YTD. In fact, it's pretty respectable. Of course, I do snicker when the self-proclaimed smartest guys in the room get dunked.
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