I occasionally peruse the Finalternatives website. Generally to find out who is going to jail and which hedge fund manager despite delivering sub par performance for the past decade has still managed to buy a $25,000,000 apartment

I came across this headline whilst scanning it this morning –

Thiel Launches Growth-Stage VC Firm

I thought to myself that name sounds familiar so I read a bit more. Turns out Peter Thiel is the principal of the hedge fund Clarium which has lost over 90% of its assets. And having dropped 90% of other peoples money he has raised $402M to drop into a firm that invests in emerging companies.

The firm is called Mithril Capital Management. For the non geeky out there mithril is a form of silver mentioned in Lord of The Rings. Bilbo Baggins gave Frodo a shirt made of mithril chain mail.

A quote from the press release says –

Technology holds solutions to most of the world’s most pressing challenges, from resource scarcity to disease. Solving an intractable problem may require a decade of work, but a lifetime of vision,” said Thiel, who will serve as chairman of Mithril’s investment committee. “Mithril will play a patient, focused, and pivotal role in helping the world’s most outstanding creative minds and build lasting companies that change the world.”

I would have thought that not flushing away staggering amounts of other peoples money would solve a lot of the worlds problems as well.

I grabbed this piece from Wikipedia on performance of Clarium since I was too lazy to look it up myself.

Recent performance 2008-2010

Clarium was down 4.5% in 2008,^[10] down 25% in 2009,^[11] and down 23% in 2010.^[4] For the first half of 2008, the fund had a YTD return of 57.9%.^[12] At the start of 2008, the fund had $4 billion in assets under management,^[7] raised to $7.8 billion in June 2008, then dropped to $1.5 billion in July 2009, after investors withdrew money from the fund.^[13] The fund lost most of its value in 2008 due to large bets against the US dollar, in the hopes that it would drop in value. The fund subsequently lost 13% in August 2008 and it lost 18% in October 2008. Although the fund eventually recovered, with losses of only 4.5% for 2008 compared to the average of 20% for other hedge funds, most investors had already pulled out their investments. Subsequent down years have reduced the fund’s assets under management to $681M as of December 2010.^[4] Clarium Capital Management was reported to have had big losses in 2010.^[14] The firm has continued to struggle with bets that it made on inflation and the US dollar.^[7]

I am not certain what it takes to drop 90% in one fund and then put your hand out for more money.

I can only guess what we will be reading about this fund in a few years time. Perhaps we will hear that Mithril started off the size of an Orc but has been reduced to the stature of a dwarf.