5 ms·

Clarium Loses 90% From Peak After Thiel Hedge Fund Has Third Losing Year

53 points by borism 16y ago

btilly 16y ago
This reminds me of http://www.boston.com/bostonglobe/ideas/articles/2011/01/09/that_guy_who_called_the_big_one_dont_listen_to_him/ http://www.boston.com/bostonglobe/ideas/articles/2011/01/09/... in that here we have a person who successfully called big extreme things (PayPal, Facebook, rising oil prices, the economic collapse) but yet has, in aggregate, lost almost 2/3 of his investors money with his predictions.
- yummyfajitas 16y ago
  Most of his investors did not lose 65%. During 2008, he gained 59% in the first 6 months, lost 40% during the second 6 months, and so was only down about 4.5% for 2008. He then lost another 25% during 2009. The fund is down 65% from it's peak (Jun 2008), so investors only lost 65% if they bought into the fund in July 2008 and pulled money out in Dec 2009. An investor who got in on Jan 1, 2008 is only down 30%, and an investor who got in in 2002 has gained 12%/year.
  - btilly 16y ago
    Thanks for the correction. May I suggest sending it to the editors of the article? I got the "almost 2/3" line from their first paragraph.
    - borism 16y ago
      what should they be correcting? Everyone who stayed with him since mid 2008 has lost 65% of their net worth they had in Clarium as of 2008. However, considering that Clarium assets under management are down from about $8bn to about $2bn, that's only about 25% of investors since the peak (assuming everyone invested equal sums of money at the same point in time - most certainly not true). people should first learn to read financial journalism correctly before sending "corrections" back :)
    - yummyfajitas 16y ago
      The second paragraph clarifies that "clients who stuck with him suffered losses of 65 percent from the mid-2008 peak." I was just making the point that giving Thiel your money wasn't necessarily a bad move. He has failed to properly manage at least one of {volatility, investor's expectations}, but he has still made 12%/year.
localhost3000 16y ago
It's amazing the opportunities that spawn from one big success. He could lose 100% of the fund and he'd still be the guy who did Paypal.
drawkbox 16y ago
I am no market genius, I do alright, but how do you lose 23% in 2010? or how did he not make a killing in 2009? Those were two of the best stock years in this decade and going back to the Great Depression aftermath the last century (barring the tech bubble). Also, if they warned of the housing bubble, did they do nothing to protect assets? The losses should have stemmed around 20-40% if they knew that.
- chrismealy 16y ago
  I'm sure it's all those women voting to blame.
- maukdaddy 16y ago
  sigh Here we go with the "predicted" housing bubble again: If I make 10 predictions per day, per year, statistically one of them will probably come true. Get mainstream media involved, ignorant "financial" bloggers, etc. and suddenly I'm a freaking genius who predicted something long before anyone else did! This doesn't make me start, trustworthy, or anything else, and it certainly doesn't warrant investing billions of dollars with.
- brown9-2 16y ago
  His fund is investing in much more than just stocks: His fund seeks to profit from broad economic trends by trading everything from currencies to commodities, a strategy known as macro investing. Such hedge funds returned an average of 2.2 percent last year, 12.6 percent in 2009 and 5.9 percent in 2008, according to data compiled by Bloomberg. ... The bulk of Thiel’s losses last year came in April, June, September and November. The Clarium fund declined 6.5 percent in April, as losing bets in U.S. equities and overseas debt offset gains made in commodities, according to an investor letter. Two months later it slumped 7.7 percent through stocks and currencies. The biggest losses came in September, when the fund slumped 8.4 percent on stock bets, according to a letter. Two months later Clarium dropped 7.8 percent because of currencies and fixed income. ... In October, the Clarium fund had a gross exposure to currencies of 33 percent, which increased to 45 percent the following month.
- gojomo 16y ago
  Not everyone is 'long' in stocks (betting they go up). So it really doesn't matter if a year is the 'best' (for those 'long'); it matters the specific positions held.
Umalu 16y ago
I'm waiting for some honest soul to start the Lightning Strikes Twice Fund. Whenever someone succeeds massively, intellectually we may "know" that there's a great deal of randomness in that but instinctively we want to believe it must have happened because they are smarter, better, etc. So for their next venture we throw our money at them hoping lightning will strike twice. This phenomenon is most acute where markets are most efficient, such as in the stock market.
- nickpinkston 16y ago
  Don't laugh - VCs enjoy people with past success which is the same as saying "lightning strikes twice" - for both some type of filter and personal reputation hedging.
  - jam 16y ago
    ...unless you consider financial markets to be sufficiently complex that individual success is unlikely to be correlated to good decisions. It's more difficult to say the same of successful entrepreneurs.
- marvin 16y ago
  That's not a bad idea at all, if it possible to somehow short a fund. On average, the new best-performing funds each year will invariably do worse the next year, just because on average they were lucky to do so well in the first place. But investors will be more drawn to them than to the funds that performed worse.
deleted 16y ago
[deleted]
hristov 16y ago
Thiel is very intelligent, but the problem is he is not nearly as smart as he thinks he is. That is a common problem with a lot of successful people.
deleted 16y ago
[deleted]

53 points by borism 16y ago

This reminds me of http://www.boston.com/bostonglobe/ideas/articles/2011/01/09/that_guy_who_called_the_big_one_dont_listen_to_him/ http://www.boston.com/bostonglobe/ideas/articles/2011/01/09/... in that here we have a person who successfully called big extreme things (PayPal, Facebook, rising oil prices, the economic collapse) but yet has, in aggregate, lost almost 2/3 of his investors money with his predictions.

yummyfajitas 16y ago
Most of his investors did not lose 65%. During 2008, he gained 59% in the first 6 months, lost 40% during the second 6 months, and so was only down about 4.5% for 2008. He then lost another 25% during 2009. The fund is down 65% from it's peak (Jun 2008), so investors only lost 65% if they bought into the fund in July 2008 and pulled money out in Dec 2009. An investor who got in on Jan 1, 2008 is only down 30%, and an investor who got in in 2002 has gained 12%/year.
- btilly 16y ago
  Thanks for the correction. May I suggest sending it to the editors of the article? I got the "almost 2/3" line from their first paragraph.
  - borism 16y ago
    what should they be correcting? Everyone who stayed with him since mid 2008 has lost 65% of their net worth they had in Clarium as of 2008. However, considering that Clarium assets under management are down from about $8bn to about $2bn, that's only about 25% of investors since the peak (assuming everyone invested equal sums of money at the same point in time - most certainly not true). people should first learn to read financial journalism correctly before sending "corrections" back :)
  - yummyfajitas 16y ago
    The second paragraph clarifies that "clients who stuck with him suffered losses of 65 percent from the mid-2008 peak." I was just making the point that giving Thiel your money wasn't necessarily a bad move. He has failed to properly manage at least one of {volatility, investor's expectations}, but he has still made 12%/year.

localhost3000 16y ago

It's amazing the opportunities that spawn from one big success. He could lose 100% of the fund and he'd still be the guy who did Paypal.

drawkbox 16y ago

I am no market genius, I do alright, but how do you lose 23% in 2010? or how did he not make a killing in 2009? Those were two of the best stock years in this decade and going back to the Great Depression aftermath the last century (barring the tech bubble). Also, if they warned of the housing bubble, did they do nothing to protect assets? The losses should have stemmed around 20-40% if they knew that.

chrismealy 16y ago
I'm sure it's all those women voting to blame.
maukdaddy 16y ago
sigh Here we go with the "predicted" housing bubble again: If I make 10 predictions per day, per year, statistically one of them will probably come true. Get mainstream media involved, ignorant "financial" bloggers, etc. and suddenly I'm a freaking genius who predicted something long before anyone else did! This doesn't make me start, trustworthy, or anything else, and it certainly doesn't warrant investing billions of dollars with.
brown9-2 16y ago
His fund is investing in much more than just stocks: His fund seeks to profit from broad economic trends by trading everything from currencies to commodities, a strategy known as macro investing. Such hedge funds returned an average of 2.2 percent last year, 12.6 percent in 2009 and 5.9 percent in 2008, according to data compiled by Bloomberg. ... The bulk of Thiel’s losses last year came in April, June, September and November. The Clarium fund declined 6.5 percent in April, as losing bets in U.S. equities and overseas debt offset gains made in commodities, according to an investor letter. Two months later it slumped 7.7 percent through stocks and currencies. The biggest losses came in September, when the fund slumped 8.4 percent on stock bets, according to a letter. Two months later Clarium dropped 7.8 percent because of currencies and fixed income. ... In October, the Clarium fund had a gross exposure to currencies of 33 percent, which increased to 45 percent the following month.
gojomo 16y ago
Not everyone is 'long' in stocks (betting they go up). So it really doesn't matter if a year is the 'best' (for those 'long'); it matters the specific positions held.

Umalu 16y ago

I'm waiting for some honest soul to start the Lightning Strikes Twice Fund. Whenever someone succeeds massively, intellectually we may "know" that there's a great deal of randomness in that but instinctively we want to believe it must have happened because they are smarter, better, etc. So for their next venture we throw our money at them hoping lightning will strike twice. This phenomenon is most acute where markets are most efficient, such as in the stock market.

nickpinkston 16y ago
Don't laugh - VCs enjoy people with past success which is the same as saying "lightning strikes twice" - for both some type of filter and personal reputation hedging.
- jam 16y ago
  ...unless you consider financial markets to be sufficiently complex that individual success is unlikely to be correlated to good decisions. It's more difficult to say the same of successful entrepreneurs.
marvin 16y ago
That's not a bad idea at all, if it possible to somehow short a fund. On average, the new best-performing funds each year will invariably do worse the next year, just because on average they were lucky to do so well in the first place. But investors will be more drawn to them than to the funds that performed worse.

deleted 16y ago

[deleted]

hristov 16y ago

Thiel is very intelligent, but the problem is he is not nearly as smart as he thinks he is. That is a common problem with a lot of successful people.

deleted 16y ago

[deleted]