Peter Thiel, founder of hedge-fund firm Clarium Capital Management LLC, said the British pound will continue to weaken this year as the U.S. dollar and Japanese yen appreciate.
The U.K. is the “worst country in the world at this point,” partly because of its trade deficits, Thiel said at the World Economic Forum in Davos, Switzerland.
The British government’s efforts to protect the banking system from the financial turmoil last week led to a drop in the pound to the lowest level against the dollar since 1985. The currency traded at $1.4313 as of 11:56 a.m. in New York today.
Thiel, whose fund trades everything from stocks to commodities, seeks to profit from broad economic trends, a strategy known as macro investing. He said that there would be “no fast recovery” of the global economy.
Investors should “stay very underweight equities, if at all, and you basically assume that the bailouts will not work to the degree they are expected to, the government will do less or not succeed in stopping this deleveraging process,” he said. Deleveraging is the process of paying down debt to lessen the risk of default.
Thiel, 41, who co-founded PayPal, started Clarium in 2002 after selling the online-payments service to EBay Inc. for $1.5 billion. His fund lost about 4.5 percent last year, according to investors. Macro funds gained 5.7 percent last year, while all hedge funds lost an average of 18 percent, according to data compiled by Hedge Fund Research Inc. of Chicago.
Government officials including U.S. Treasury Secretary Timothy Geithner have backed greater regulation and disclosure requirements for hedge funds.
“Some degree of regulation is probably desirable at this point, just as a way of reassuring the people who are invested in this industry,” Thiel said
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