The Danger of Dilettante Hedge Fund Managers

“My broker called and told me that Europe is overblown.”

“My accountant also runs my investment portfolio.”

“My insurance broker is also my asset manager.”

You see how ridiculous these statements sound when they’re written down?  Well I hear stuff like that every day on the phone and in meetings.  How about this one:

“This guy’s an amazing venture capitalist so I’m going to have him trade currencies and make huge macro market bets for me also.”

Peter Thiel is a genius, plain and simple – he sees value before others and his savvy in technology investing is a thing to marvel at.  But does that mean he should be running a global macro hedge fund?  Apparently not…

From Bloomberg:

Peter Thiel, whose Clarium Capital Management LLC lost 90 percent of assets from its peak until the end of last year, plans to invest the global macro hedge fund in what made him a billionaire: private technology ventures.

Clarium may invest a “significantly higher percentage” of assets in private equity in the near term, the San Francisco- based firm said in a July regulatory filing. The investments will include tech companies, James O’Neill, a managing director, said in an interview.

Thiel, who became a billionaire with investments in PayPal Inc., Facebook Inc., game maker Zynga Inc. and LinkedIn Corp., is steering his hedge fund to technology companies after Clarium’s assets shrunk some 90 percent from more than $7 billion in mid-2008, thanks in part to losing bets on oil prices, currencies and stocks. Demand for social-networking stocks has pushed the implied value of privately owned Facebook beyond $82 billion, leading some investors to caution that a new tech bubble is underway.

By the way, I shouldn’t be managing a global macro hedge fund either.  So I’m not.  The lesson of the Peter Thiel story is that making billions of dollars is not the same as running billions of dollars.  Thiel gets it and is now going back to what he’s really cut out for, a very smart decision.

The world of trading and global markets is not one for dilettantes, even the ones who’ve been successful elsewhere.


Thiel’s Clarium Hedge Fund to Make Tech Investments After Losses (Bloomberg)

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