The manager of the Jupiter Absolute Return Fund, James Clunie, is leaving Jupiter with the fund being taken over by the Fund Group’s multi-asset team run by Talib Sheikh.
The aim of the fund is to produce a longer-term average return of 4% a year, over and above the interest rate on cash. Mr Clunie has tried to achieve this through combining traditional ‘long’ positions in stocks he believes are undervalued with ‘short’ positions in those he believes are overpriced where he can profit from any fall in value. However, Clunie, a veteran of the industry and a highly regarded manager at Jupiter for 7 years, has found his strategy horribly at odds with the market over the past couple.
A broadly ‘market neutral’ positioning, where shorts have balanced out longs combined with a preference for ‘value’ stocks on the long side in has resulted in disappointing performance. A bias towards the UK and away from the US, the chief driver of global markets in recent years, has also been damaging. Indeed, it has been something of a ‘perfect storm’ for the manager as cheaper stocks simply got cheaper and many popular ‘glamour’ stocks he shorted continued to rise, despite a lack of profitability in many cases. A particular nemesis was Tesla whose meteoric performance from October 2019 was costly to the fund. Although offering a source of differentiation and diversification in a portfolio, the fund lagged most others in its sector and has suffered outflows from investors disillusioned with returns.
More recently, fund performance has stabilised and has shown better form as news of successful Covid-19 vaccines propelled cheaper areas of the market ahead of more stable growth stocks and technology heavyweights. Some investors may wish to retain the fund, at least in the short term, as a potential beneficiary of a continuation of this trend, as well as its ability to provide genuine diversification from share markets, something many funds in the sector cannot claim to offer. However, going forward the fund will likely see some changes to its structure and process as the new managers take the reins from 1st January 2021. We will provide a further update when we know more about these.
The fund has been removed from our Direct Investment Service Preferred List our curated list of investments for new investment in their respective sectors.
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