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. 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 (NYSE:PMF)
PIMCO Floating Rate Strategy Fund (NYSE:PFN)
Iron Mountain Incorporated (NYSE:IRM)
Consolidated Edison (NYSE:ED)
Kimberly-Clark Corporation (NYSE:KMB)
T-3 Energy Services (TTES)
Natus Medical (NASDAQ:BABY)
National Municipal Bond Fund (NYSEARCA:MUB)
United States Oil Fund (NYSEARCA:USO)
ishares Brazil ETF (NYSEARCA:EWZ)
Interval Leisure Group (NASDAQ:IILG)
Exxon Mobil (NYSE:XOM)
United States Natural Gas Fund (NYSEARCA:UNG)
Financial Select Sector ETF (NYSEARCA:XLF)
Removed Positions (Positions Clarium sold out of completely last quarter):
Cabot Oil & Gas (NYSE:COG)
Petroleo Brasileiro (NYSE:PBR)
ITT Corporation (NYSE:ITT)
Aircastle Limited (NYSE:AYR)
Frontier Oil (NYSE:FTO)
Marathon Oil (NYSE:MRO)
Royal Caribbean (NYSE:RCL)
Berkshire Hathaway (NYSE:BRK.B)
Foster Wheeler (FWLT)
Pinnacle Airlines (PNCL)
Black & Decker (BDK)
Top 20 Holdings (based on % of portfolio):
- Financial Select Sector ETF (XLF): 38.5% of portfolio
- Google (GOOG): 28.8% of portfolio
- Yahoo (YHOO): 28.7% of portfolio
- Hewlett Packard (NYSE:HPQ): 0.4% of portfolio
- Microsoft (MSFT): 0.3% of portfolio
- McDonalds (NYSE:MCD): 0.3% of portfolio
- Procter & Gamble (NYSE:PG): 0.3% of portfolio
- Burlington Northern (BNI): 0.27% of portfolio
- Philip Morris International (NYSE:PM): 0.27% of portfolio
- United States Natural Gas Fund (UNG): 0.1% of portfolio
- Mastercard (MA): 0.1% of portfolio
- Conoco Philips (NYSE:COP): 0.1% of portfolio
- Fairfax Financial (FFH): 0.1% of portfolio
- Occidental Petroleum (NYSE:OXY): 0.1% of portfolio
- Exxon Mobil (XOM): 0.1% of portfolio
- Schering Plough (SGP)
- Altria (NYSE:MO)
- Interval Leisure Group (IILG)
- Canadian Superior Energy (SNG)
- NRG Energy (NYSE: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.