James Clunie is monitoring US stocks with a view to shorting potentially overvalued companies, as he begins to implement his plans for the Jupiter Absolute Return fund, he has told Investment Adviser in his first interview.
Mr Clunie took charge of the £337m fund at the start of this week following Philip Gibbs’s decision to retire in October 2014.
The manager told Investment Adviser that he planned to have a chiefly bottom-up, long/short equity strategy similar to the UK Flexible Strategy fund he ran at Swip, his previous employer. Although the investment objective and mandate of the Jupiter Absolute Return fund has not changed, this approach is likely to be very different to Mr Gibbs’ primarily top-down strategy.
“Generally speaking, I’m taking long positions in value stocks in the UK and Europe, and short positions in ‘not value’ stocks in the UK and US,” Mr Clunie said. “At the margin I would like to be slightly short US stocks.”
Absolute return managers can use financial instruments to place ‘short’ bets on stocks which produce positive returns if the price of those stocks falls.
Although he has yet to implement many changes, he added that he currently had a “slightly anti-emerging markets” stance but emphasised this would be expressed chiefly through short positions in UK stocks because of their higher valuations.
“Emerging markets look interesting for anyone who can hold for seven years,” he said.
Citing research by Crossborder Capital, which had reported low liquidity in emerging market equities, Mr Clunie said: “Liquidity tends to lead markets by 12-18 months, which means on a one-year view I should be cautious [on emerging markets].”
Mr Clunie added that he would “team up” with Jupiter’s bonds and convertibles experts - including Strategic Bond fund manager Ariel Bezalel and Global Convertibles fund manager Miles Geldard - when investing in these asset classes.
He said: “The mandate of the Absolute Return fund hasn’t changed - it is still a global multi-asset long/short fund, which gives me a lot of flexibility. But it can also be risky because [managers] can be tempted to try things that [they] don’t know much about - I prefer to focus on an area where I think I have an edge. My edge is short selling.”
