Can a successful entrepreneur also be a successful hedge fund manager? Apparently not, judging by the struggles of Clarium Capital’s Peter Thiel.
The hedge fund wannabe deserves huge accolades for co-founding PayPal and for his early investment in Facebook. However, his recent track record as an investor is lousy, bordering on atrocious. He has lost money for the past two years and three of the past four years. And this year he is down again, by more than 10 percent through April. So, it is hardly surprising his assets have shrunk nearly 90 percent, to less than $1 billion, from a peak of around $7.2 billion.
Thiel describes Clarium as a broadly opportunistic, global macro fund. The Fund invests mainly in currency, commodity, debt, and equity instruments. Thiel’s problem seems to be his inability to separate his intellectual macro bearishness from making money in the markets.
He has been bearish for the past few years. He believes the U.S. has lost its technological innovation, that the government cannot fix all of our problems and that productivity needs to greatly improve, among other things. He actually may be right about all of these things. However, his investors just care whether he makes money.
In early 2008, Thiel was up about 50 percent through June, riding up the commodities wave. However, he did not see the reversal in those markets in the second half, and wound up finishing the year down about 4.5 percent. He then declined to participate in the global recovery of the financial markets in 2009, and lost another 25 percent. And he remains skeptical.
If Thiel can’t reverse the losses, Clarium could suffer from financial problems. He does not charge a management fee, instead opting to levy a 25 percent performance fee. It looks like a race to see whether Thiel pulls the plug on the fund before all of his investors pull the plug on him.
Stephen Taub, who has covered the hedge fund industry for 30 years, is a contributing editor to Institutional Investor and Absolute Return-Alpha magazines.
