Jupiter pledges support for James Clunie despite shutting fund

Jupiter has pledged its “full support” for James Clunie despite deciding to liquidate one of his absolute return funds as his long run of underperformance drags on.

The group confirmed it is closing the Jupiter Global Levered Absolute Return fund, a sub-fund of the Jupiter Global fund Sicav, after a series of redemptions since the start of the year.

Jupiter launched the Jupiter Global Levered Absolute Return fund in 2017 in response to a specific request from an institutional investor looking for a higher risk version of the Jupiter Absolute Return fund. As a starting point the leverage is approximately two times the Absolute Return fund unit trust, although it is adjusted on a case-by-case basis.

According to FE Fundinvest, the fund, launched in October 2017, had just £8.7m of assets under management as at 7 February and fell 27.6% over the past year.

A Jupiter spokesperson said: “Since launch, a small number of other institutional investors acquired units in the fund, however, following a period of underperformance by the strategy, those investors decided to redeem in 2020, leaving the net assets of the fund below such an amount as is necessary for the fund to be managed in an economically efficient manner.

“As such we believe the closure of the fund is in the best interests of its shareholders.”

‘The team has Jupiter’s full support’

The Jupiter spokesperson confirmed to Portfolio Adviser that Clunie continues to run the Jupiter Absolute Return and Global Levered Absolute Return unit trusts, with the firm’s full backing.

Jupiter CIO Stephen Pearson said: “We are conscious that this has been a really challenging period for investors in this strategy. James has been working closely with our sales teams to make sure that all clients fully understand his process, the reasons behind the strategy’s current underperformance and the positioning of the strategy to navigate the present market environment.

“The team has Jupiter’s full support throughout this process.” 

Shorts in highly-valued growth stocks

Clunie has persisted in taking short positions in highly-valued growth stocks, such as Tesla and the Scottish Mortgage Investment Trust, in the hope they fall back, but the market keeps driving their prices higher. Tesla’s recent tripling in share price added to his woes.

According to FE Fundinfo data, Clunie’s unit trust, the Jupiter Absolute Return fund, has generated a return of -14.2%, -17.8% and -7.2% over one, three and five years, respectively, compared with the IA Targeted Absolute Return sector’s 4.2%, 5.3% and 8.8%.

Morningstar noted Jupiter Absolute Return as the fourth worst-performing fund in January after delivering investors a -7.7% return over the month. Throughout 2019, the fund shed £299m, going from £1.53bn to £1.16bn, according to Morningstar flows data.

Morningstar downgraded Jupiter Absolute Return in July last year from bronze to neutral due to resourcing issues and manager research analyst Fatima Khizou told Portfolio Adviser its view and rating of the strategy have not changed.

Khizou said: “We continue to think that the approach to research, portfolio construction and risk management, all have their limitations. The portfolio’s long-standing biases continue to detract from returns.”

AJ Bell head of active portfolios Ryan Hughes said: “Clunie may well be right in the long run, but a lot of damage may have been done to investors capital in the intervening period. With his fund down 10% this year alone, it prompts questions around the risk management approach being taken in the fund.

“It’s going to be some very patient and understanding investors who genuinely believe in his investment approach to sit through this period of performance that has now delivered a loss of 4% in the six years that he has been managing the fund.”

Jupiter Absolute Return and Global Levered Absolute Return performance versus benchmarks

Source: FE Fundinfo