Legendary short seller Jim Chanos is making a comeback. After enduring what he called “one giant short squeeze” during the long-running bull market, Chanos got a break last year when the stock market finally cracked.
Chanos’ short-only fund, Ursus, gained 18 percent in 2022, compared with a negative 12 percent return in 2021, according to an individual familiar with the results. In terms of absolute numbers, it was the best gain for the short-only fund in many years — leaving it with more than $100 million in assets under management at the end of 2022, according to the ADV Chanos recently filed with the Securities and Exchange Commission. Ursus held around $60 million at the end of 2021.
Meanwhile, Chanos’ hedged vehicle, Kynikos Capital Partners, gained 7 percent in 2022, compared with a 15 percent gain in 2021. Kynikos Capital is a 190/90 fund — 190 percent long and 90 percent short — that helped Chanos weather the bull market. It had previously been considered his flagship, but had less than $25 million at year end, according to the SEC filing.
Last year Chanos also launched two new special purpose vehicles, according to the filing, one of which is leveraged. Both of those funds are shorting data centers and have been profitable since their launch in June of last year, according to an individual familiar with their strategy. The unlevered fund, which raised the most money, gained a net 12 percent last year, according to an investor document.
The two funds had amassed almost $50 million at year end, according to the ADV.
“What amazes me is that they were able to raise a decent amount of assets because it’s such a niche strategy,” said an investor in one of the SPVs, who noted that the fund’s short positions are hedged with derivatives.
One of the SPVs’ biggest positions is Digital Realty Trust, which Chanos has spoken and tweeted about often. He called it a “financially challenged company” in a tweet on Thursday, citing a new Morgan Stanley report saying that its dividend could be at risk. The stock is down 10 percent this year and almost 30 percent since these vehicles were launched in June of last year.
Chanos has also pointed out that data centers are subject to the same problems as commercial real estate, which is starting to buckle under economic pressures.
“Just a reminder that data centers, which keep getting built(!), have the same vacancy rates as offices,” he said on Twitter on March 28. The comment was in response to an analyst’s tweet saying that vacant office in the U.S. was “at its highest level ever of 18.7 percent,” and that investors should “get ready for a wave of defaults on commercial real estate loans.”
In addition to the special purpose vehicles, Chanos also launched a European UCITs version of Kynikos Capital Partners last October in the European Union and the U.K.
Last year, Chanos also closed several hedge funds, including Kritikus International and Knikos Global Partners, whose assets had withered. The remaining assets of each fund were rolled into Ursus and Kynikos Capital Partners, respectively.
Assets at Chanos’ hedge fund firm, which he now calls Chanos & Co., jumped about 30 percent last year, to $327.42 million by the end of 2022, according to the filing.