It’s an old tale given a new twist by the Internet: Great entrepreneurs don’t always make great investors. Peter Thiel was a co-founder of PayPal and an early backer of Facebook. Yet his once-promising San Francisco–based global macro hedge fund, Clarium, which at its peak in 2007 had $7 billion, is reportedly down to about $500 million, most of it Thiel’s own wealth.

But give Thiel, 43, his due as a CIO. Launched post-dot-com collapse in 2002, Clarium performed well in its early years. And Thiel made the right macro bet on the mortgage market — the fund was up 40 percent in ’07. But in 2008, Clarium entered a three-year cycle of losses, ending 2010 down 23 percent for the year. A fervent Libertarian, Thiel has been known to make big contrarian bets in line with his convictions.

He recently became a seed investor in Grandmaster Capital Management, a hedge fund firm founded last month by former Clarium Capital Management managing director Patrick Wolff. This is Thiel’s first investment with an outside manager, and sources say it may not be his last. Perhaps picking investment talent will play more to his strengths than calling markets has. Besides, in a dot-com world you can always reboot.

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