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Jupiter Absolute Return

Elite Rated by FundCalibre

Manager James Clunie is something of a ‘short selling specialist’, having completed his PhD on the subject. Short-selling, which means trying to make money when share prices fall, is therefore a key strategy of this absolute return fund, which invests primarily in global equities with the aim of generating a positive return in both rising and falling markets. James typically has a small style bias towards value stocks.This fund does not have a performance fee.

Company Description

Founded in 1985, Jupiter Asset Management has grown from a specialist investment boutique to a global fund management company. It provides a range of products from bond and equity funds to multi-asset strategies for both retail and institutional clients.

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Fund Manager

James has managed the fund since September 2013, the same year he joined Jupiter from Scottish Widows, where he ran a similar strategy for four years. In an intriguing career of more than 25 years, James has worked across both commercial and academic fields, completing a PhD and lecturing in finance at the University of Edinburgh, alongside fund management. James is assisted by support analyst Ivan Kralj, with whom he worked at Scottish Widows.

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Our edge in the targeted absolute return space is our skills in shorting stocks – that’s what sets us apart.

James Clunie - Fund Manager

The Investment Process

James describes his process as “floppy”, by which he means he likes to be flexible in how and where he can invest, although this word belies his strongly mathematical approach. He uses three screens to analyse stocks over three different time horizons to determine their ‘fair value’ and whether they are currently trading above or below that value. Based on the result, he may then either invest in a stock (if it looks fair or undervalued) or short it (if it looks overvalued). A high valuation on its own will not be sufficient reason to short a stock though, James must also see a potential price drop catalyst. James does not believe in trying to second-guess the decisions of politicians or central bankers, but he will instead prepare for several different scenarios and analyse how his portfolio might react in each case.

Risk

The shorting component of this strategy means this fund has a particularly low correlation with other asset classes. Further, James will not invest more than 5% of the total portfolio in any one stock, nor take a larger short position than 3%. This helps to mitigate the negative impact of any stock price falls on the fund’s overall returns. On the other hand, the fund’s defensive nature and focus on capital protection does mean it will often underperform rising markets.

Our Opinion

It is rare to find a fund with such low historic correlation to other asset classes, even in the absolute return space, which may make this fund an effective diversifier and a good complementary portfolio holding. James has a good track record in short selling and the fund has performed consistently under his management.

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