Peter Thiel's Clarium Capital Management has been able to sniff out themes ahead of the rest of Wall Street. But they are not really part of Wall Street.
Yes, there is no group think at Clarium's Presidio headquarters in San Francisco, but there is an awful lot of piggybacking in Hedgistan. Thiel's bets on energy, long, were mostly off the table a month ago. His real winning trade, shorting levered companies (mostly bets against financial stocks) was working like a dream until regulators called an audible. Clarium gave back a little ground, but hardly enough to warrant sensationalist headlines:
Hedge funds are having their worst month in eight years after popular bets against banks and in favour of rising commodity prices went badly wrong.
Among those hit by the unwinding of the bank/energy trade, according to letters to investors, are two of the best-performing hedge funds of the past 18 months – Harbinger Capital and Clarium Capital.
New York-based Harbinger, which manages $26bn, lost 12 per cent in the first 2½ weeks of July, while San Francisco’s Clarium plunged 10 per cent in a week to leave it down 4.3 per cent for the month to the 18th – although both remain strongly up for the year.FT
Thiel's themes have gotten a little too popular, and crowded. But with Libertarians and the stockgods on his side, Thiel is in it to win it, and I bet he breaks Bernanke & Co. in the end.
“There has been a ferocious bear squeeze in banks and it is becoming apparent that financials/energy position was much more widely held than had been understood.”
Many hedge funds have been betting that bank stocks would fall further as the credit crunch continued to bite, and that oil and other commodity prices would keep rising – a trade that generated big profits this year, helping offset losses in other areas.
But over the past fortnight the trade has been hit by a double whammy: one of the most vicious falls in commodity prices on record and a leap in financial stocks.
“One of the things that’s obvious with the financials/resources trade is that everybody had it on,” said Paul Meader, director of Guernsey-based hedge fund investor Corazon Capital.
“There are quite a few people who are hurting this month.”
Thiel and Clarium might be down slightly for the month, but he has earned a free pass from this site for the time being. However, the gang at Clarium had better get used to the intense media scrutiny, and quickly, as it seems they have captured the investing publics imagination now that the cat is out of the bag.
There are very few good stories on Wall Street at the moment, but many of the winners are in the gunsights of Hank Paulson’s bazooka.
But once the manipulation by the government runs out of steam Thiel will pad his lead. And while a tickertape parade on lower Broadway is out of the question, he might be the first two time winner of 1440’s Man of the Year.
I would love to hear Peter’s thoughts on the recent regulatory moves. Someone will be left standing at the end of all this nonsense...who is your money on?
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When I worked at the Chicago Merc our jackets were adorned with the Phrase Free Markets for Free Men. Thiel can probably sympathize with the sentiment.
Hedge funds have worst month since 2000 Financial Times -------------------------------------------------------------------------------------------------------------
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Comments:
I don’t find the headline all that sensationalized. Some of the losses (including those cited above) *are* huge, by anyone’s standards. Although for funds like Harbinger, whose gains have been astronomical, it would seem inconceivable that they’d have big money pulled, at least until you see a pattern of sustained losses. As for Clarium’s 4.3% month to date loss, it’s pretty large, but I also agree, that if he’s up substantially for the year, especially given how terrible the year has been for so many, he deserves a pass, for now.
Posted by on 07/26/2008 at 07:25 AM
Yeah it is just funny how what was so private, and held little interest outside a small circle of people is now news...ie the headlines on individual hedge fund performance. It is one thing to discuss it, and another to throw out rumors about funds blowing up. I think some bloggers jumped the gun last August saying that certain funds blew up, when they had in fact not.
I think anyone that goes into Clarium understands what kind of volatility they are willing to endure in order to put up the numbers. Clarium was up 24% in January and 16% in June, but was down 9.9% in March and have suffered a few down 10% months since they started.
Given they are up 50% YTD i don’t think it is a big deal...as a fund manager you have to decide how much short term pain to take for long term gain.
If Paulson runs out of ammo Clarium will finish the year strongly.
It would seem like covering shorts in some of those financial as the implosion picked up steam in the second week of July would have been prudent, and the short selling initiatives were sure to spark a short term rally.
But their performance hinges on the financials, unless they add significant new exposure, always a possibility.
I am wondering where Clarium will close to new investors...everyone seem to stumble around that $25-$30 billion point.
Highbridge got thru it, but few others have, successfully.
Although Global Macro strategies certainly can the capacity to grow as large as many multi strat funds.
SJ
Posted by on 07/26/2008 at 03:06 PM
Please keep me posted on any new information regarding Clarium Capital and Peter Thiel.
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