"Peter Thiel got rich investing in PayPal and Facebook Inc. before most people knew them, built a hedge fund that at its apex managed $7.2 billion, and forecast the collapse of the U.S. housing market. He also lost almost two-thirds of his clients’ money.
Clarium Capital Management LLC, which Thiel started in 2002 in San Francisco, fell about 23 percent in 2010, the third straight year of declines, according to investors. His fund’s assets are down about 90 percent and clients who stuck with him suffered losses of 65 percent from the mid-2008 peak.
“It doesn’t matter if a manager is correct in his long- term views if they don’t get the timing right or manage volatility along the way,” said Don Steinbrugge, managing partner of Agecroft Partners, a Richmond, Virginia-based consulting firm that advises investors and hedge funds.
While Thiel’s views, including predictions that the U.S. would face the threat of deflation and that the dollar and oil would rise, mostly came true, the losses reflect poor market timing and a lack of risk controls, according to several current and former clients. Thiel, 43, has stepped up measures to monitor risk and last year closed his firm’s New York office. He is still betting that the current economic recovery is unsustainable and that 30-year Treasuries will gain, said a person familiar with his outlook."