Clarium Capital PROFILE

Peter Thiel Wiki Entry

Clarium Capital Management LLC is a San Francisco, CA based ‘global macro’ (buy/sell anything) hedge fund managed by ‘technopreneur’ Peter Thiel. The firm invests in fixed income, public equity and follows opportunistic strategies in global commodities, currencies, bonds, distressed debt and micro-cap companies. Trade magazines MarHedge and Absolute Return had honored Clarium as the global macro fund of the year in 2005.

An avowed Libertarian, Peter Thiel wears may hats. Born in Frankfurt in Germany and raised in California, he was one of the highest rated under-21 chess master in the US and ranked number 7 in the under-13 category. He obtained his B.A in Philosophy from Stanford and started the Stanford Review – the university main Libertarian/conservative newspaper. He received a J.D from the Stanford Law School in 1992.

In 1996, Peter launched Thiel Capital Management – a multistrategy investment fund, after trading derivatives in Credit Suisse from 1993 to 1996. He was one of the co-founders of PayPal and took the company public in February 2002. PayPal was sold for $1.5 billion to eBay later that year – four years after it was started in 1998, and Thiel netted $60 million. He started Clarium Capital in 2002 and made half a million dollar angel investment in Facebook in 2004 for a 10.2 per cent stake. A serial entrepreneur, he has invested in numerous early stage start-ups including Linkedin, Zynga Inc., Yelp, Inc., Geni.com, Yammer, Booktrack, Vator, Palantir Technologies and IronPort. Thiel’s management views are highly regarded in the corporate world – especially in the start-up space, and he is popularly known as the ‘Don of the PayPal Mafia’ in Silicon Valley. Thiel – along with former PayPal buddies Luke Nosek and Ken Howery, and Sean Parker – the Napster cofounder and an erstwhile PayPal president, established the venture capital firm Founders Fund in 2005 and has about $500 million under management.

The World Economic Forum honored Thiel as a Young Global Leader in 2007. Thiel sits on the board of Hoover Institution and has contributed to Forbes, The Wall Street Journal and Policy Review.

Clarium’s assets under management peaked to $8 billion in 2008 after which the US housing market collapse triggered the economic slowdown and a series of unsuccessful investments wiped out almost one-third of client’s money. Assets under management slipped to under $500 million earlier by early 2011, thanks in part to losing bets on oil, currencies and stocks, forcing Thiel to shutter the fund’s New York City operations and scale up the San Francisco office.

Like other macro funds, Clarium LP – the firm’s main hedge fund, takes contrarian positions based on economic cycles, government policies, commodity fluctuations and new technology. “It’s been a very challenging and frustrating year,” Thiel had said investors in a conference call in 2010. The biggest challenge “is getting a handle on what’s actually going on in the world. The timing on this has been extremely difficult to calibrate,” Thiel said, admitting Clarium’s short positions were squeezed as the equity markets boomed in 2010. Clarium will desist from shorting stock for some time, “though we continue to think equities are extremely over-valued,” he had announced.

He had predicted deflation and a strong dollar in 2010 as the “real economy and the financial economy” had to converge. Criticizing the Fed for initiating QEs, he said they have created “fake Goldilocks market” by increasing the money supply and kept interest rates low artificially.

“We’re thinking of looking at going long on the dollar next year,” he had said in 2010 about his future investment strategy. This was contrary to Wall Street forecast of a weaker dollar due to QE2 and higher corresponding inflation.

“We’ve got some things wrong. But over time, I think we’ve gotten more right than we’ve gotten wrong. … It’s not the right thing to focus on a six-month horizon. The future happens over a very long period of time,” Thiel told BusinessWeek in an interview in early 2011. Going forward, the firm will invest a ‘significantly higher percentage’ of funds in tech firms that have not yet gone public, a July 2011 regulatory filing claimed.

Quotes:

Quote 1: (On Clarium losing value) – “It’s been a very challenging and frustrating year (in 2010). (The challenge) is getting a handle on what’s actually going on in the world. The timing on this has been extremely difficult to calibrate.

Quote 2: (On his shorts going wrong and the stock market booming in H2, 2010) – “(We) will refrain from [shorting stock] anytime soon (though) we continue to think equities are extremely over-valued. We have seen this with Silicon Valley.”