Tesla Short Seller Exits Jupiter

Jupiter Absolute Return fund manager James Clunie is to step down from the firm following a sustained period of underperformance after he bet against Tesla, Netflix and Amazon 

Holly Black 7 December, 2020 | 1:24PM
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Exit sign

James Clunie is one of three fund managers stepping down from Jupiter Asset Management, after a torrid period for the value investor.

Clunie has run the Jupiter Absolute Return fund since 2013 and performance has suffered in recent years after a number of controversial calls by the manager. The Jupiter Absolute Return fund was previously rated Bronze by Morningstar analysts but was later downgraded to a Neutral rating, before coverage of the fund ceased.

The fund is down 17.64% year to date and has delivered annualised losses of 8.51% over three years. Absolute return funds typically aim to deliver positive returns regardless of the economic environment, but the approaches of these funds can vary widely.

The Jupiter Absolute Return fund has the ability to take short positions in stocks, that is to bet against them, and Clunie had notably held a short position in Tesla shares for a considerable period of time. Shares in the electric vehicle maker have soared more than 500% this year and the stock has now joined the S&P 500 as the sixth largest position in the index.

Betting Against Soaring Stocks

Of his bet against the tech favourite, Clunie has previously told Morningstar: “It’s simply the expression of a negative view on the price of an asset. I have an idea of what it’s worth and why it should go down.”

The manager has also shorted video streaming service Netflix (NFLX), retail giant Amazon (AMZN) and Chinese electric vehicle maker Nio (NIO), all which have soared this year, further hurting the fund’s performance. Clunie told Morningstar earlier this year: ““What I’ve done is what I call ‘sensible’ stuff and maybe that’s my weakness: it’s too logical, it’s too evidence-based, it’s too sensible.””

Jonathan Miller, head of manager research at Morningstar UK, says Clunie had long been clear on his process, which had a value bias and was “short the type of quality growth stocks and technology names that have rallied in recent years”, a trend that has only been exacerbated in 2020. Miller adds: “John Maynard Keynes says that ‘markets can remain irrational longer than you can stay solvent’, and I think we’ve seen that in action here.”

The fund’s sustained period of underperformance has led to significant outflows, with £553 million withdrawn from the fund in March at the height of the Covid-19 pandemic. In March, just 28 of the 121 funds in the Investment Association Targeted Absolute Return sector positive positive returns. Assets under management in the Jupiter fund have now dwindled to just £180 million.

Strategic Review at Jupiter

From January 1, 2021 the Jupiter Absolute Return fund will be managed by Jupiter’s multi-asset team, lead by Talib Sheikh. A Jupiter spokesman says the move will mean the fund can “draw upon a broader range of capabilities under the experienced leadership of Sheikh”. Jupiter adds: “While we intend to retain the core proposition of the global, outcome-oriented approach of the fund, we will take the opportunity to review aspects of the investment process and proposition.”

The change comes as part of a wider strategic review at the boutique investment house, which earlier this year bought rival group Merian. Under the review, the Jupiter Global Absolute Return and Jupiter Europa funds will be closed from December 15, with the manager of the latter, Mike Buhl-Nielsen, also leaving the company.

Elsewhere, the Jupiter Growth & Income fund will now be managed by Ed Meier, formerly of Merian Global Investors, and the Jupiter Distribution & Growth and Jupiter Distribution fund will also be handed to Sheikh’s multi-asset team.

Morningstar analyst Rajesh Yadav said: “We will meet with Sheikh and [his colleague] Rhys Petheram in the coming weeks to better understand how they intend to run the strategy going forward. Until then, the strategies are placed under review.”

Jupiter chief investment officer Stephen Pearson addeds: “In line with our recent Assessment of Value report, it is important that we keep our product range under constant review to make sure that we are providing the most suitable and relevant range of products to fit the evolving needs of our clients.”


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Holly Black  is Senior Editor, Morningstar.co.uk


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