Wednesday, November 05, 2008

Bloomberg: Thiel's Clarium Hedge Fund Declines 18% in Octobe

Thiel's Clarium Hedge Fund Declines 18% in October (Update1)
By Saijel Kishan

Nov. 5 (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.''

The $1.7 trillion hedge-fund industry is experiencing its worst year in almost two decades because of declining stock markets and a credit freeze that started with rising defaults of U.S. subprime mortgages. Hedge funds lost an average 9.26 percent last month and declined 19.7 percent this year, according to Hedge Fund Research Inc.'s HFRX Index.

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.

Macro Investing

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. Such funds lost 1.27 percent last month and have risen in value by 1.3 percent this year, according to HFR in Chicago.

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.

Clarium isn't alone in posting steep losses in October. Passport Management LLC, the $3.1 billion hedge-fund firm run by John Burbank III, lost 38 percent for the month, extending its annual loss to 44 percent, according to an investor letter.

The fund, which has returned an average 27 percent annually since it was started in 2000, lost money last month on commodity stocks. Mary Beth Grover, a spokeswoman for San Francisco-based Passport, declined to comment.


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