PayPal Founder’s Hedge Fund Goes Into Freefall
Monday, November 10th, 2008Let this be a lesson to all of you who make millions online and then decide to start a hedge fund. Don’t take on too much debt!
Just ask PayPal founder Peter Thiel, whose hedge fund firm Clarium Capital Management LLC, has seen its Clarium LP fund incurring a 40 percent loss in the three months to October 2008.
Clarium’s approach has essentially been to borrow money in order to invest it. This can give investors huge returns when times are good… but when times aren’t so good, it can be disastrous. As at October 31, Clarium had $4.40 in borrowings for every $1 in equity capital. Apparently, the fund is still in good health, but investors are understandably becoming nervous…
Peter Thiel started Clarium after selling PayPal to EBay Inc. for $1.5 billion in 2002.
