Hedge Fund Clarium Capital's August Commentary: Save Now, Invest Later

Here's the latest from Peter Thiel's hedge fund Clarium Capital. Their August commentary is titled 'Save Now Invest Later' and makes for some interesting reading (as does typically all of Clarium's commentary). Through the end of June, Clarium was down 6% for 2009 as noted in a recent piece, 'macro hedge funds bet against recovery.' As of the end of August, Clarium is now -8.3% for the year. That article further goes on to divulge that Clarium is positioned for a bear market by betting on the US dollar, hypothesizing the currency will strengthen due to leveraged investors selling equities to pay down debt they used to finance the equity trades they were in. Additionally, they are keeping a steady eye on the unemployment rate among other indicators. Clarium was down another 4.5% in August and is now -8.3% for the year. The poor performance even reportedly had a normally calm Peter Thiel yelling at Managing Director Jack Selby. For the year of 2008, Clarium was also down 4.5%. Someone once told us it's almost as if they think that the fancier the idea, the bigger the potential profit. Somewhere along the line at Clarium there seems to be a disconnect between the idea and turning it into a successful trading strategy.

While Clarium continues to have interesting research, they still have yet to translate those ideas into solid performance. All the same, we'll gladly read their commentary as it's always prudent to evaluate all sides of an argument regarding the economy and markets, whether you agree or disagree with them. And as an avid lifelong supporter of Manchester United Football Club, we were caught a bit offguard (yet delighted) to see Clarium start off their letter with a quote from the great George Best.

RSS & Email readers will need to come to the blog to view the letter or you can try downloading the .pdf here:

Clarium Save Now Invest Later


We also recommend checking out their past commentary, as well as their piece, 'Macro Framework For Equity Valuation.' Lastly, you can also check out some brief thoughts from Peter Thiel from the Ira Sohn investment conference.

Peter Thiel & Clarium Capital's Huge Oil Services Play: 13F Filing Q1 2009

This is the 1st Quarter 2009 edition of our ongoing hedge fund portfolio tracking series. Before reading this update, make sure you check out the Hedge Fund 13F filings series preface.

This week is 'global macro week' here at Market Folly and we'll be covering some of the equity positions of the major global macro strategy hedge funds. We want to start off this week with a slight disclaimer. Since global macro funds trade all different types of asset classes, they're not an ideal bunch to track or to clone a portfolio from. However, they are some of the smartest minds out there in terms of secular themes, trading, and market timing. As such, we monitor their movements in equities to get a sense as to what sectors they like, when they're moving out of long equity positions, and to see if we can see any secular themes they might be playing. So, this week is not so much about tracking as much as it is about taking a step back and observing the 'bigger picture.'

Next up in our series of global macro funds is Clarium Capital Management, LLC ran by Peter Thiel, the co-founder of PayPal. Clarium is a $2 billion hedge fund that has had the majority of its holdings in the debt and currency markets. Keep in mind that the equity portion of their portfolio has always been minimal, so the stocks below only represent a small sliver of their overall holdings. While they have indeed boosted their equity holdings, they still have their portfolio primarily invested in other markets. Additionally, we must also add in a second disclaimer that Clarium has been net short US equities in previous performance breakdowns we've seen from them. So, keep all that in mind when viewing the information below. 2008 was a roller coaster year for Thiel and company, to say the least. Earlier in 2008, they were up over 45%. But, with a mistimed move into equities, they began to give back their gains and found themselves -4.5% for 2008 as we noted in our year end post of hedge fund performance numbers. The bulk of the losses were sustained in October, where they were down 18% for the month. Assets under management had recently ballooned to the highest amount in Clarium's history, but that didn't last long as redemption requests rolled in and markets continued to tank.

Thiel's fund is unique in that it employs a slightly different management fee structure than most of the hedge fund world. Typical funds charge a flat 2% management fee on assets and then a 20% performance fee. Clarium, on the other hand, does not charge a management fee, but charges only a 25% performance fee. They obviously have more incentive to perform well, to ensure they get paid. And, 2008 didn't go too well in that regard. Thiel recently sat down and opined on numerous macro topics, including whether the US is the next Japan. Clarium hasn't necessarily fared to their liking as they were -1.4% for the month of May and were down 1.7% for the year as of that time (as noted in our hedge fund performances post where you can also see Clarium's performance breakdown sheet).

We track Clarium because we feel they are at the forefront of global macro thought and we like to see what they are extrapolating on a macro level. Over the past few weeks, we've covered some of their latest investor letters where they deliver some excellent market commentary. Additionally, we also covered their addendum to such letter where they evaluated a 'Macro Framework for Equity Valuation.' In the addendum, they examine valuation in two ways: from typical Benjamin Graham valuation and then also from a positive/negative liquidity standpoint. Both concepts are described in the letter, but you can of course get a better understanding of Graham's valuation by reading his well-renowned book Security Analysis (a staple in our recommended reading list).

At the recent Ira Sohn conference where numerous hedge fund managers presented investment ideas, Peter Thiel presented plenty of his own thoughts. He has opined that we will see inflation in things we need (commodities) and deflation in assets we own. And, we've sort of already seen that. Make sure you check out all of Thiel's thoughts from the conference as well.

The following were Clarium's long equity, note, and options holdings as of March 31st, 2009 as filed with the SEC. We have not detailed the changes to every single position in this update, but we have covered all the major moves. All holdings are common stock unless otherwise denoted.


Some New Positions (Brand new positions that they initiated in the last quarter):
Oil Service Holdrs (OIH), McDonalds (MCD), Select Sector Energy (XLE), Oracle (ORCL), Nike (NKE), Reynolds American (RAI), Kimberly Clark (KMB), Fuel Systems (FSYS), Brigham Exploration (BEXP), Nexen (NXY), Post Properties (PPS), Best Buy (BBY)


Some Increased Positions (A few positions they already owned but added shares to)
Philip Morris International (PM): Increased by 80%
Procter & Gamble (PG): Increased by 50%
Diageo (DEO): Increased by 50%


Some Reduced Positions (Some positions they sold some shares of - note not all sales listed)
Walgreens (WAG): Reduced by 83%
American Express (AXP): Reduced by 69%
Altria Group (MO): Reduced by 69%


Removed Positions (Positions they sold out of completely)
SPDR S&P 500 (SPY), Schering Plough (SGP), Mastercard (MA), Playboy (PLA), Exxon Mobil (XOM), Teradata (TDC), Burlington Northern (BNI), NCR (NCR), Meadow Valley (MVCO), Interval Leisure (IILG)


Top 10 Holdings (by % of portfolio)

1. Oil Service Holdrs (OIH): 95.3% of portfolio
2. McDonalds (MCD): 0.83% of portfolio
3. Select Sector Energy (XLE): 0.72% of portfolio
4. Philip Morris International (PM): 0.30% of portfolio
5. Procter & Gamble (PG): 0.27% of portfolio
6. Microsoft (MSFT): 0.24% of portfolio
7. NRG Energy (NRG): 0.23% of portfolio
8. American Express (AXP): 0.23% of portfolio
9. Altria Group (MO): 0.17% of portfolio
10. Hewlett Packard (HPQ): 0.15% of portfolio
    

We were tempted to only list their top 5 portfolio positions here because, let's face it, that's the only meaningful part of their portfolio. They had a mindboggling 95.3% of their long equity portfolio invested in oil service stocks via OIH as a brand new position. While this is not out of the norm for Clarium to have a large portion of their equity portfolio tied up in one position, it has never been of this magnitude before. As such, we don't want to try and extrapolate too much from it as it could have merely been a shorter-term play. After all, last quarter they had 21% of their portfolio in the S&P500 via SPY and then this quarter they don't have it in their portfolio at all. As such, these quick moves must be noted when examining their portfolio.

Assets from the collective holdings reported to the SEC via 13F filing were $527 million this quarter compared to $31 million last quarter. As you can see, there was quite a large jump in assets invested on the long side. At the same time, their $500 million or so invested on the long side still only represents one piece of their overall portfolio. We've covered in the past how Clarium has had the majority of its positions in the debt and currency markets. As such, this is the perfect example of an equity portfolio you would not want to clone or mimic. We use Alphaclone to clone hedge fund portfolios of value oriented, fundamental, long-term oriented funds as they are the easiest to track. Global macro or trading hedge funds are not ideal to track in this regard due to the fact that they have positions in other markets and their propensity to move in and out of positions faster. This is just one of the 40+ prominent funds that we'll be covering in our hedge fund Q1 2009 portfolio series. We've already covered:

- Gurus such as: Soros Fund Management (George Soros), and Jim Rogers.

- 'Tiger Cub' portfolios like: Andreas Halvorsen's Viking Global, Stephen Mandel's Lone Pine Capital, John Griffin's Blue Ridge Capital, Lee Ainslie's Maverick Capital, Shumway Capital Partners (Chris Shumway), Chase Coleman's Tiger Global,

- Outperforming funds like: John Paulson's hedge fund Paulson & Co, Eric Mindich's Eton Park Capital, Raj Rajaratnam's Galleon Group,

- Value and activist funds such as: David Einhorn's Greenlight Capital, Seth Klarman's Baupost Group, Whitney Tison's T2 Partners, Philip Falcone's Harbinger Capital Partners, Ricky Sandler's Eminence Capital,

- Concentrated funds that play secular/macro themes such as: Timothy Barakett's Atticus Capital, Bret Barakett's Tremblant Capital Group, Boone Pickens' BP Capital Management, John Burbank's Passport Capital

- Global macro firms such as: Paul Tudor Jones' Tudor Investment Corp, Louis Bacon's Moore Capital Management,

- And, newer funds on the scene: David Stemerman's Conatus Capital. Check back each day as we cover new fund portfolios.

Clarium Capital April 2009 Performance (Peter Thiel)

We're back with another installment of the latest performance from Peter Thiel's global macro hedge fund, Clarium Capital. In the past, we've also covered Clarium's January as well as their February performance if you're curious how their portfolio has shifted over the past quarter. They finished up 1.7% for April and are now -0.3% year to date. Some of their largest exposure currently is in the Forex Cross, net long foreign debt, and net short US equities. Overall, they are using 3.2 to 1 leverage.

We track Clarium because we feel they are at the forefront of global macro thought and we like to see what they are extrapolating on a macro level. Over the past few weeks, we've covered some of their latest investor letters where they deliver some excellent market commentary. Additionally, we also covered their addendum to such letter where they evaluated a 'Macro Framework for Equity Valuation.' In the addendum, they examine valuation in two ways: from typical Benjamin Graham valuation and then also from a positive/negative liquidity standpoint. Both concepts are described in the letter, but you can of course get a better understanding of Graham's valuation by reading his well-renowned book Security Analysis (a staple in our recommended reading list).

Since they are a global macro firm and typically have little equity exposure for us to ponder via 13F's (their equity exposure lately has been on the short side), these investor letters are necessary insight to their thoughts and investment process. Upon reading their commentary you can start to piece together why they have taken on certain exposures in various sectors and asset classes. Again, make sure you check out their market commentary as well as their addendum.

Here is their latest breakdown sheet with all the details:

(click to enlarge)

Clarium is a $2 billion global macro hedge fund that currently has the majority of its holdings in the debt and currency markets. Thiel's fund is unique in that it employs a slightly different management fee structure than most of the hedge fund world. Typical funds charge a flat 2% management fee on assets and then a 20% performance fee as well. Clarium, on the other hand, does not charge a management fee at all. Instead, they charge only a 25% performance fee. They have added incentive to perform well with this structure, otherwise they don't get paid. In the next week or two we'll be covering Clarium's long equity portfolio (however small it may be) when the new 13F filings are released, so be on the look out.

Clarium Capital Investor Letter: Macro Framework For Equity Valuation

This next investor letter from Peter Thiel's global macro hedge fund Clarium Capital is an addendum to the letter we posted last week. In their previous letter, Clarium outlined market commentary. In this letter, they address 'A Macro Framework for Equity Valuation.' In this unique piece, they examine a valuation derived from two analyses. They have first examined the fundamental process derived from Benjamin Graham's book Security Analysis (a staple in our recommended reading list). Secondly, they determine whether a given year is experiencing "positive liquidity" or "negative liquidity" (a concept explained in the letter).

It's a very fascinating read and we highly recommend you digest their commentary, both in the form of their investor letter and the addendum listed below. We definitely consider Clarium to be at the forefront of global macro thinking, especially in a 'new generational' sense. RSS & Email readers may need to come to the blog to view the embedded document.

In the past, we've covered Clarium's (scarce) equity portfolio, as well as their February 2009 performance numbers in depth. Without further ado, the letter:

Publish at Scribd or explore others: Finance Business & Law clarium peter thiel

Peter Thiel's Clarium Capital: Investor Letter (Market Commentary)

Just wanted to share this great read from Peter Thiel's global macro hedge fund Clarium Capital. Their latest investor letter is entitled 'The Wonderful Wizard of Oz' where they lay out some interesting market commentary. If you've missed it in the past, we've covered Clarium's equity portfolio as well as their detailed performance breakdown from February 2009. Enjoy:

(Email & RSS readers may need to come to the blog to view the slidedeck)

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Clarium Capital February 2009 Performance

Here's the latest from Peter Thiel and gang.

• February: -2.3%
• YTD: 4.3%

Make sure to also check out our recent look at Clarium's tiny equity portfolio.

(click to enlarge)

Peter Thiel's Clarium Capital 13F Filing: Q4 2008

This is the 4th Quarter 2008 edition of our ongoing hedge fund portfolio tracking series. Before reading this update, make sure you check out the Hedge Fund 13F filings preface.

Next up is Clarium Capital Management, LLC ran by Peter Thiel, the co-founder of PayPal. Clarium is a $2 billion global macro hedge fund that currently has the majority of its holdings in the debt and currency markets. Keep in mind that the equity portion of their portfolio has always been minimal, so the stocks below only represent a small sliver of their overall holdings. 2008 was a roller coaster year for Thiel and company, to say the least. Earlier in 2008, they were up over 45%. But, with a mistimed move into equities, they began to give back their gains and found themselves -4.5% for 2008 as we noted in our year end post of hedge fund performance numbers. The bulk of the losses were sustained in October, where they were down 18% for the month. Assets under management had recently ballooned to the highest amount in Clarium's history, but that didn't last long as redemption requests rolled in and markets continued to tank.

Thiel's fund is unique in that it employs a slightly different management fee structure than most of the hedge fund world. Typical funds charge a flat 2% management fee on assets and then a 20% performance fee. Clarium, on the other hand, does not charge a management fee, but charges only a 25% performance fee. They obviously have more incentive to perform well, to ensure they get paid. And, 2008 didn't go too well in that regard. Thiel recently sat down and opined on numerous macro topics, including whether the US is the next Japan. And, to those who want a little more background on Thiel & his investment style, we first wrote about him here. Clarium has started off 2009 on a positive note, finishing the month of January up 6.7%, as we noted in our latest Clarium update. We'll have to see if they give back the gains like they did in 2008; hopefully they've learned from their mistakes.

The following were their long equity, note, and options holdings as of December 31st, 2008 as filed with the SEC. We have not detailed the changes to every single position in this update, but we have covered all the major moves. All holdings are common stock unless otherwise denoted.


Some New Positions (Brand new positions that they initiated in the last quarter):
S&P 500 (SPY)
Walgreen (WAG)
Intel (INTC)
Playboy (PLA)
Teradata (TDC)
NCR Corp (NCR)
Meadow Valley (MVCO)
National Coal (NCOC)


Some Increased Positions (A few positions they already owned but added shares to)
American Express (AXP): Increased position by 1020%
T3 Energy (TTES): Increased position by 318%
Altria (MO): Increased position by 106%
NRG Energy (NRG): Increased position by 75%


Some Reduced Positions (Some positions they sold some shares of - note not all sales listed)
Burlington Northern (BNI): Reduced position by 95%
Hewlett Packard (HPQ): Reduced position by 91%
Exxon Mobil (XOM): Reduced position by 90%
Procter & Gamble (PG): Reduced position by 85%
Philip Moriss International (PM): Reduced position by 84%
Interval Leisure (IILG): Reduced position by 83%
Microsoft (MSFT): Reduced position by 79%
Mastercard (MA): Reduced position by 73%
Schering Plough (SGP): Reduced position by 39%


Removed Positions (Positions they sold out of completely)
Pimco Municipal fund (PMF)
Wendys (WEN)
Nvidia (NVDA)
Oracle (ORCL)
Pimco Floating Rate fund (PFN)
Mylan (MYL)
Iron Mountain (IRM)
Consolidated Edison (ED)
Kimberly Clark (KMB)
Natus Medical (BABY)
Colgate Palmolive (CL)
Walmart (WMT)
Chevron (CVX)
Johnson & Johnson (JNJ)
CVS Caremark (CVS)
Ishares Municipal Bond fund (MUB)
Lazard (LAZ)
United States Oil Fund (USO)
Ishares Brazil (EWZ)
Canadian Superior Energy (SNG)
SPDR Gold Trust (GLD)
Occidental Petroleum (OXY)
Fairfax Financial (FFH)
Conoco Phillips (COP)
US Natural Gas fund (UNG)
McDonald's (MCD)
Google (GOOG)
Yahoo (YHOO)
Select Sector Financial (XLF)


Top 20 Holdings (by % of portfolio)

1. S&P 500 (SPY): 21.35% of portfolio
2. American Express (AXP): 16.38% of portfolio
3. Walgreen (WAG): 11.67% of portfolio
4. Altria Group (MO): 8.55% of portfolio
5. NRG Energy (NRG): 5.15% of portfolio
6. Microsoft (MSFT): 4.9% of portfolio
7. Procter & Gamble (PG): 3.9% of portfolio
8. Philip Morris International (PM): 3.43% of portfolio
9. Schering Plough (SGP): 3.29% of portfolio
10. Mastercard (MA): 3.16% of portfolio
11. Hewlett Packard (HPQ): 2.86% of portfolio
12. Alabama Aircraft (AAII): 2.2% of portfolio
13. Diageo (DEO): 1.8% of portfolio
14. Intel (INTC): 1.4% of portfolio
15. Playboy (PLA): 1.28% of portfolio
16. Exxon Mobil (XOM): 1.23% of portfolio
17. T3 Energy (TTES): 1.17% of portfolio
18. Teradata (TDC): 1.17% of portfolio
19. Burlington Northern (BNI): 0.96% of portfolio
20. MFA Mortgage (MFA): 0.93% of portfolio

Clarium's assets listed in the filing decreased, undoubtedly because of their move away from equities and into other asset classes. They completed sold out of some of their massive holdings from last quarter: GOOG, YHOO, & XLF. This isn't the first time that Thiel has had only a tiny sliver of his portfolio in equities. Assets from the collective long US equity, options, and note holdings were $2.8 billion last quarter and were $31 million this quarter. This is just one of many funds in our hedge fund portfolio tracking series in which we're tracking 35+ prominent funds. We've already covered Paulson & Co (John Paulson), Carl Icahn, Warren Buffett, Stephen Mandel's Lone Pine Capital, George Soros, Bill Ackman's Pershing Square, Andreas Halvorsen's Viking Global, Timothy Barakett's Atticus Capital, David Einhorn's Greenlight Capital, and Seth Klarman's Baupost Group. Look for our updates as we will be covering a new fund each day.

Peter Thiel's Clarium Capital & Ken Griffin's Citadel: January 2009 Performance

Peter Thiel's Clarium Capital finished the month of January +6.7%. If you're unfamiliar with Clarium, we've covered them on the blog before.

Here is their breakdown:

(click to enlarge)

And if that is too hard to read, here is the .pdf courtesy of Dealbreaker.

Additionally, Bloomberg gave us a glimpse as to how Ken Griffin's Citadel is performing in the new year. After being down 55% last year, their main Kensington and Wellington funds finished up 4.75% for January 2009. Don't forget that Citadel has opened one of its funds to investors as they try to purchase some of the equities held in their main funds.

You can view Citadel's portfolio here and Clarium's portfolio here (although do note that Clarium doesn't do much in long US equities).

Videos of Peter Thiel's Latest Comments (Clarium Capital)

Peter Thiel of hedge fund Clarium Capital recently spoke about numerous topics in videos linked below:

Video 1: On whether the US is the next Japan.

Video 2: Four theories on the bubble and bust economy

Video 3: What the decline of hedge funds means for main street

Video 4: On the history of economic bubbles

And don't forget to check out Clarium Capital's latest equity portfolio holdings changes, which we recently detailed here.

Hedge Fund Tracking: Peter Thiel's Clarium Capital - 13F Filing 3rd Quarter 2008

(Note: Before reading this update, make sure you check out the preface to the series we're doing on Hedge Fund 13F's here).

This is the 3rd Quarter 2008 edition of our ongoing hedge fund tracking series. We'll be bringing you the long side of the portfolios of numerous prominent hedge funds. Hedge funds we track here at MarketFolly.com include: Tudor Investment Corp, Maverick Capital, Greenlight Capital, Blue Ridge Capital, Moore Capital Management, Lone Pine Capital, and literally many, many more. We're aiming to cover 35 or so prominent funds this time around and we'll be releasing the 13f analysis here in the coming weeks on each individual fund. We've already covered Whitney Tilson's T2 Partners here.

The second fund in the 3rd quarter edition of our 2008 hedge fund tracking series is Clarium Capital Management, LLC. Clarium is a $6 billion global macro hedge fund run by Peter Thiel, the co-founder of PayPal. 2008 has been a roller coaster year for Thiel and company. Earlier in the year, they were up over 45%. But, as market volatility increased, they began to give back their gains and now find themselves -2.8% for the year. This was in part due to a rough October, in which they were down 18% for the month, in part due to their recent shift into equities. Assets under management had recently ballooned to the highest amount in Clarium's history and it will be interesting to see how effective Clarium will be at deploying this new capital going forward. Thiel's fund employs a slightly different management fee structure than most of the hedge fund world. Typical funds charge a flat 2% management fee and then a 20% performance fee. Clarium, on the other hand, does not charge a management fee, but charges a 25% performance fee. They obviously have more incentive to perform well, to ensure they get paid. Before reading this quarter's update, you might be interested in reading our coverage of Clarium's 2nd quarter portfolio holdings. And, to those who want a little more background on Thiel & his investment style, we first wrote about him here.

So, now that we've got a background on Thiel and Clarium, let's take a quick look at his portfolio highlights. Keep in mind that this is merely a brief summary of Clarium's top holdings. Due to the time sensitive nature of the 13F material, we wanted to get this information posted as soon as possible. The following were Clarium's holdings as of September 30th, 2008 as filed with the SEC.

New Positions (Brand new positions that Clarium initiated in the last quarter):
PIMCO Municipal Income Fund (PMF)
Oracle (ORCL)
PIMCO Floating Rate Strategy Fund (PFN)
Iron Mountain Incorporated (IRM)
Consolidated Edison (ED)
Kimberly-Clark Corporation (KMB)
T-3 Energy Services (TTES)
Natus Medical (BABY)
National Municipal Bond Fund (MUB)
United States Oil Fund (USO)
ishares Brazil ETF (EWZ)
Interval Leisure Group (IILG)
Exxon Mobil (XOM)
Mastercard (MA)
United States Natural Gas Fund (UNG)
Microsoft (MSFT)
Yahoo (YHOO)
Google (GOOG)
Financial Select Sector ETF (XLF)

Removed Positions (Positions Clarium sold out of completely last quarter):
Cabot Oil & Gas (COG)
Petroleo Brasileiro (PBR)
Honeywell (HON)
ITT Corporation (ITT)
Aircastle Limited (AYR)
Frontier Oil (FTO)
Marathon Oil (MRO)
ONEOK (OKE)
Royal Caribbean (RCL)
Berkshire Hathaway (BRK.B)
Foster Wheeler (FWLT)
Nucor (NUE)
Pinnacle Airlines (PNCL)
Sothebys (BID)
Black & Decker (BDK)

Top 20 Holdings (based on % of portfolio):

1. Financial Select Sector ETF (XLF): 38.5% of portfolio
   
2. Google (GOOG): 28.8% of portfolio
3. Yahoo (YHOO): 28.7% of portfolio
4. Hewlett Packard (HPQ): 0.4% of portfolio
5. Microsoft (MSFT): 0.3% of portfolio
6. McDonalds (MCD): 0.3% of portfolio
7. Procter & Gamble (PG): 0.3% of portfolio
8. Burlington Northern (BNI): 0.27% of portfolio
9. Philip Morris International (PM): 0.27% of portfolio
10. United States Natural Gas Fund (UNG): 0.1% of portfolio
11. Mastercard (MA): 0.1% of portfolio
12. Conoco Philips (COP): 0.1% of portfolio
13. Fairfax Financial (FFH): 0.1% of portfolio
14. Occidental Petroleum (OXY): 0.1% of portfolio
15. Exxon Mobil (XOM): 0.1% of portfolio
16. Schering Plough (SGP)
17. Altria (MO)
18. Interval Leisure Group (IILG)
19. Canadian Superior Energy (SNG)
20. NRG Energy (NRG)
    

First, we need to cover the odd construction of Clarium's portfolio, which may be puzzling some of you reading. Clarium employs a global macro strategy and therefore invests across multiple markets (commodities, currencies, debt, bonds, global markets, etc). And, due to the fact that SEC 13F filings only require equity holdings to be disclosed, we only get to see a small slice of their overall portfolio. We track Clarium's equity holdings simply because Thiel is very intelligent and they could enter equity markets at any moment. For instance, in our 2nd quarter analysis of Clarium's holdings, we noted that they only had $93 million invested in equities as detailed in the filing. And, considering they had over $6 billion AUM (assets under management) at the time, the equities detailed in the filing were miniscule positions compared to their overall fund size. But, as we recently noted, Clarium shifted to equities in late September. And thus, we see part of this reflected in the current 13F filing. In the 2nd quarter, they had $93 million invested in equities. But, this time around (3rd quarter), they had over $2.8 billion invested in equities.

This drastic jump in capital allocated to long positioned equities also helps to describe their lopsided portfolio. Keep in mind they also probably had equity short positions as well, which we cannot see. As you'll notice in the top 20 holdings listed above, the top 3 holdings make up a vast percentage (%) of the portfolio relative to their other positions. Those positions included: Financial select sector ETF (XLF), Google (GOOG), and Yahoo (YHOO). Clarium definitely felt that the financials and specific tech names were vastly beaten down and due for a correction. The rest of the positions are small relative to their overall equity exposure at only 0.1%-0.3% of the equity portfolio. These smaller positions reflect the minimal equity exposure Clarium had in the quarter prior, where they were hardly invested in equities.

We will have to wait until next quarter to see whether or not Thiel was building up core positions in Google (GOOG) and Yahoo (YHOO), or simply trading them. We have a feeling though, that these position sizes will be reduced in size come next quarter. After all, they are a global macro fund and they will quickly allocate their money to the markets and positions they feel are poised to benefit. But, that is merely speculation on our part.

Keep in mind that we have not detailed every tiny maneuver they have made with their portfolio. In some of their holdings they added shares, and with others they sold some shares. We are essentially capturing the major moves Clarium has made over the past quarter with regards to their portfolio.

This is the second hedge fund we're covering in our 3rd quarter 2008 edition of our series of tracking 35+ prominent hedge funds. We've already covered Whitney Tilson's T2 Partners here. Stay tuned this week and next week as we detail the portfolio holdings of more funds. Overall, its been one of the worst years ever for hedge funds, as we noted in our recent October hedge fund performance update. Thus, the recent moves they've made in their portfolios become all the more interesting given the way the market has played out. Here are some funds we will be tracking to look forward to: David Einhorn's Greenlight Capital, Lee Ainslie's Maverick Capital, Paul Tudor Jones' Tudor Investment Corp, Louis Bacon's Moore Capital Management, and many, many more.

More on Clarium Capital & Peter Thiel:

- Overall hedge fund performance numbers update: October 2008
- Clarium's October 2008 performance update
- Thiel & Clarium Shift to Equities
- Clarium's August 2008 performance update
- Clarium's 2nd quarter 2008 portfolio holdings/analysis
- More on Peter Thiel

More Hedge Fund Performance Numbers

The NY Post has a graphic up which reveals a few more performance numbers for various hedge funds. Among them are Jim Simons' Renaissance Technologies. His Medallion Fund continues to dominate, up 49% as of the end of September. Peter Thiel's Clarium Capital is up 27.8% year-to-date thanks to winning bets in currencies and debt. Also, as we noted here, Clarium has recently shifted into equities. Tudor Investment Corp's Tensor Fund is also doing quite well, up 21.3% on the year. This fund is a recent quantitative addition to Paul Tudor Jones' arsenal.

(click to enlarge)

You can check out many more hedge fund performance numbers that I've listed here.



Source: NYPost

Peter Thiel's Clarium Capital Shifts to Equities

Recently, we got word of what Clarium Capital is doing to navigate the rough waters. Clarium is a $6 billion global macro hedge fund run by Peter Thiel, the co-founder of PayPal. Assets under management had recently ballooned to the highest amount in Clarium's history and I noted that it would be interesting to see how effective Clarium would be at deploying this new capital. And, with his most recent investor letter, we see that he actually was adding to his leverage, rather than decreasing it. In the week prior to September 19th, he was borrowing 40 cents for every dollar. This past week though, he was borrowing $1.40 for every dollar. Although Thiel undoubtedly changes his leverage on a daily/weekly basis, it is still worth pointing out, given the massive deleveraging we've seen over the past months and most likely will see in the coming months.

As I wrote about in my August performance update of Clarium, we had heard Thiel was shifting out of commodities. And, it looks as though that is exactly what he has done. We now see that he actually has short positions in commodities, to the tune of about 14% of assets. Also, in my analysis of Clarium's portfolio holdings, I noted that he only had a very small percentage of assets invested in equities at the time. But, this time around, he's beefed up his equity positions. Around 71% of his assets are now in equities. And, it looks as if he has been incrementally adding to equities, as he had invested 36% of assets in equities just the week prior. And, year-to-date, he is still up 27.8%. If you want a little more background on Thiel & his investment style, I first wrote about him here.

Also worth noting, according to Morningstar, hedge funds in general saw nearly $12 billion of outflows in July. And, given the recent market activity/volatility, you'd expect that number to have increased in August and/or September.


Source: Bloomberg

Clarium Capital (Peter Thiel) Down in August: Another Hedge Fund Update

Getting tons of news today so will get right to the point:

"Clarium Capital Management LLC, the $7 billion hedge-fund firm founded by Peter Thiel, fell about 13 percent in August, its biggest monthly loss, as it bet against the U.S. dollar."

"Before August, Clarium's biggest monthly loss was in March 2004 when it fell 11.4 percent, according to an investor letter."

You'll recall I covered Clarium in my hedge fund 13F analysis series here. And, this isn't the first tough month for Clarium. As I posted here, Clarium also was down 6.8% for the month of July. So, year to date, a rough estimate would now put them at +32% year to date. I'm also hearing they're almost completely out of commodities now. So, yet another macro fund gets its ass handed to them, what else is new? Will be interesting to see if Clarium shifts from commodities to equities, as the equity portion of their portfolio is typically minimal at best (and by minimal, I mean ridiculously tiny: 1% or less of total assets under management).

Source: Bloomberg

Hedge Fund Tracking: Clarium Capital's 13F (Peter Thiel)

(Note: Before reading this update, make sure you check out the preface to the series I'm doing on Hedge Fund 13F's here).

Next up, we have Clarium Capital. Clarium is a $6 billion global macro hedge fund run by Peter Thiel, the co-founder of PayPal. Although they had a rough July (-6.8%), Clarium is still up over 45% year to date. Assets under management have recently ballooned to the highest amount in Clarium's history. It will be interesting to see how effective Clarium will be at deploying this new capital. And, to those who want a little more background on Thiel & his investment style, I first wrote about him here.

Now, to the 13F. I actually hesitated even doing a 13F analysis on Clarium Capital simply because when I say they are a global macro fund, I really mean it. The 13F they filed with the SEC details only the equities held in their portfolio. And, all their equities combined only totaled a little over $93 million. And, considering they have over $6 billion AUM, we have a bit of a problem here. The bulk of their holdings/trades seem to be in the actual commodities, futures, and currency markets themselves. And, the 13F only details equities held. So, I just wanted to point that out to everyone before proceeding further. I still think its interesting to at least see what they hold. But, take it with a grain of salt because the majority of their capital is deployed in other financial instruments/markets.

The following are Clarium Capital's current holdings as of June 30th 2008, as released in their most recent 13F filing with the SEC. I've compared the positions in this most recent 13F to last quarter's 13F and here are the changes they made to their portfolio:

New Positions: (in no particular order)
Wendy's (WEN) 7,400 shares
Pinnacle Air (PNCL) 15,220 shares
Fairfax Financial (FFH) 15,000 shares
Nvidia (NVDA) 18,000 shares
NRG Energy (NRG) 9,776 shares
MFA Mortgage Investments (MFA) 50,000 shares
Marathon Oil (MRO) 10,000 shares
Johnson and Johnson (JNJ) 12,000 shares
ITT Corp (ITT) 35,000 shares
Istar Financial (SFI) 99,800 shares
Honeywell (HON) 17,700 shares
Conoco Phillips (COP) 107,900 shares
Chevron (CVX) 6,000 shares
Canadian Superior Energy (SNG) 500,000 shares
Black and Decker (BDK) 23,437 shares
Altria Group (MO) 52,639 shares
Aircastle (AYR) 23,400 shares


Added to:
Frontier Oil (FTO): Increased their position by 1353%
Occidental Petroleum (OXY): Increased their position by 302%
CVS Caremark (CVS): Increased their position by 179%
American Express (AXP): Increased their position by 111%
Colgate Palmolive (CL): Increased their position by 77%
Oneok Inc (OKE): Increased their position by 75%
Sothebys (BID): Increased their position by 60%
Nucor (NUE): Increased their position by 49%
Cabot Oil and Gas COG): Increased their position by 42%
Foster Wheeler (FWLT): Increased their position by 22%
Walmart Stores (WMT): Increased their position by 21%
McDonald's (MCD): Increased their position by 14%
Royal Caribbean (RCL): Increased their position by 11%
Hewlett Packard (HPQ): Increased their position by 3%


Reduced Positions:
Mylan (MYL): Decreased their position by 25%
Procter and Gamble (PG): Decreased their position by 75%


Removed Positions (Positions Clarium sold out of completely):
Zimmer Holdings (ZMH)
Western Refining (WNR)
Viropharma (VPHM)
United Technologies (UTX)
McGraw Hill (MHP)
Lowes (LOW)
Lockheed Martin (LMT)
Leggett and Platt (LEG)
Heinz (HNZ)
General Motors (GM)
General Dynamics (GD)
Cisco Systems (CSCO)
Anheuser Busch (BUD)


Positions with no change:
Schering Plough (SGP)
Burlington Northern (BNI)


Top 10 holdings by % of portfolio:
1. Hewlett Packard (HPQ)
2. Conoco Phillips (COP)
3. American Express (AXP)
4. McDonalds (MCD)
5. Burlington Northern (BNI)
6. Occidental Petroleum (OXY)
7. Fairfax Financial (FFH)
8. Foster Wheeler (FWLT)
9. Royal Caribbean (RCL)
10. Frontier Oil (FTO)

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Breakdown: Clarium's portfolio really looks "plain jane," doesn't it? There's nothing ridiculously exciting going on. It almost reminds me of a portfolio Warren Buffett would put his stamp of approval on. AXP, BNI, COP, and MCD are for the most part just slow and steady names that chug along with consistent returns. Again, this is why I want to reiterate that Clarium takes the majority of their positions in the commodities, futures, or currency markets since they truly are a global macro fund. The equity holdings reported in this SEC filing represent just a small sliver of their assets under management. So, on the equity side of things, Thiel has focused mostly on larger cap names with international exposure.

Clarium is definitely heavily weighted in the energy sector. They brought Conoco Phillips (COP) in as a new holding and bumped it up all the way to their 2nd largest equity position. He was also out adding to his Frontier Oil (FTO) and Occidental Petroleum (OXY) positions in a big way. Keep in mind that these holdings were reported as of June 30th, 2008 (ie: Crude Oil hadn't started its rapid descent yet). So, we'll have to see next quarter whether he was building up long term positions in these names, or merely trying to ride the oil wave higher.

Thiel has a large bet on tech, but pretty much solely through Hewlett Packard (HPQ). He added some Nvidia (NVDA), but HPQ is the fund's top equity holding. I can't disagree with this choice, as HPQ has been firing on all cylinders with Mark Hurd really turning the company in the right direction. But, even though the company is performing well, the stock really isn't.

I also noticed that Thiel seems to also be playing the 'pooring of America' theme. His MCD and WMT positions give him exposure to the companies that offer everything on the cheap. But, what surprised me a little bit was his Royal Caribbean (RCL) stake being as large as it is. To me, this translates to a discretionary item since its a cruise/vacation after all. And, with the economy the way it is, you'd think that reservations would be down. But, Thiel obviously sees something here, so it might be worth looking at more in depth.

I also want to point out Thiel's position in American Express (AXP), now his fund's 3rd largest equity position. I'm seeing more and more funds pick up stakes in AXP. For the most part, funds have favored Mastercard (MA) and even Visa (V) for their payment processing business models. Now though, it seems more funds are rotating into AXP to get some credit exposure as well. While I think American Express (AXP) is a well run company and typically has a higher credit grade portfolio, I still question adding this name. The credit exposure will continue to provide headwinds for the company and I'm curious to see what these funds do with this position over time.

Lastly, I just wanted to mention Burlington Northern (BNI). If there is one other common theme amongst hedge fund holdings, it is the rails. No matter how small or large their position, practically everyone has at least some sort of exposure to the rails. For Thiel & Clarium, BNI is their 5th largest equity holding.

You can view Clarium Capital's entire 13F as filed with the SEC here.

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Stay tuned as I continue to detail the portfolio changes of some big name hedge funds. This week I'll be looking at: Lone Pine Capital (Steve Mandel), Maverick Capital (Lee Ainslie), Blue Ridge Capital (John Griffin), and Atticus Capital (Timothy Barakett).

Rough July for Macro Funds

Oh, how the fruits of success can come back and force-feed you some humble pie. Many macro strategy hedge funds savored their gains during the first half of the year as their large bets on long energy, short financials paid them off handsomely. July, on the other hand, was a different story. As oil retreated and numerous financials rallied, macro funds took it on the chin.

Peter Thiel's Clarium Capital was -6.8% for the month of July (hat tip JimPunkRockford). But, fanboys will be quick to point out that his fund is still up over 45% year to date.

Philip Falcone's Harbinger Capital was -16% for July (via BusinessWeek) as their large concentrated bets on energy and commodities (specifically Cleveland Cliffs - CLF) blew up in their face. But, once again, fanboys will be quick to point out that they are still up over 23% year to date.

This all when the S&P500 is roughly -14% over the exact same time frame. But, its all relative, right?

Peter Thiel / Clarium Capital

Peter Thiel is the co-founder and former CEO of PayPal. Now, besides this endeavor, you might not know that he now runs a hedge fund, Clarium Capital. They are a macro based fund and have been doing quite well for themselves. 1440WallStreet had a great post about him the other day, including a video with some of his macro thoughts. The video is older, but is a must watch if you employ any sort of macro approach to investing. He's a smart guy and has been making tons of money by simply identifying trends.

Make sure you check out 1440WallStreet's write-up on Clarium and the vid of Thiel here.