News that short seller Jim Chanos is shutting his investment fund was greeted with delight in some corners of the internet.
Chanos, whose funds have slipped this year while markets soared, manages less than $200 million (€180 million), down from $6 billion in 2008.
Shorts such as Chanos are often viewed as the spawn of the devil. As far back as 1985, Chanos said people “think I have two horns and spread syphilis”.
Anti-Chanos gloating misses the point. Firstly, Chanos has enjoyed a spectacular career. In a 2020 interview, the Financial Times reported his long/short fund averaged annualised gains of 22 per cent over the previous 35 years.
His funds enjoyed stellar returns in 2021 and even gained 7 per cent last year, when the S&P 500 cratered. More importantly, shorts like Chanos are financial detectives who make markets more efficient and root out excess and fraud.
[ Short sellers: ‘unreasonably maligned’ or ‘jerks’?Opens in new window ]
Chanos famously exposed the Enron scandal in 2001. He warned the G7 in May 2007 that a global financial crisis was coming. More recently, he bet against fraudulent German payments company Wirecard. Yes, there were misses too, particularly Chanos’s losing bet against Tesla.
No one gets everything right, but markets need forensic sceptics. The opprobrium levelled at Chanos, who has lectured at Yale on the history of financial fraud, is misplaced. Chanos has been, to quote fund manager Drew Dickson, a “hero of capitalism”.
His own riposte to critics – “your ignorance and resentment is tiresome,” Chanos tweeted last week – seems appropriate.
