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Photographer: Justin Chin/Bloomberg Photographer: Justin Chin/Bloomberg

One of Brazil’s largest independent hedge-fund managers has abandoned its bearish view on Tesla Inc., the electric-car maker run by Elon Musk.

Adam Capital has scrapped a short position in Tesla’s shares, saying in a monthly note to clients that the company’s improving operating efficiency has hurt its investment thesis. The size of the firm’s short position wasn’t disclosed.

Tesla’s third-quarter results last month have allayed some investor concerns about the demand for its electric cars and the company’s ability to churn out vehicles while maintaining strong margins.

Adam Capital manages about 23.7 billion reais ($5.9 billion) and was founded in 2016 by Marcio Appel and Andre Salgado, both hedge fund veterans from Banco Safra SA and Banco Santander’s Brazilian unit. The firm quickly became one of the nation’s biggest independent hedge-fund managers, with its flagship fund crossing 10 billion reais under management in less than year after its launch.

Adam Capital may not be alone. While some have said that Tesla’s profit reported during the period may not be sustainable in the long run, the strong results have prompted some bearish investors to throw in the towel. Since its earnings release, Tesla shares have gained about 25%, paring a year-to-date slide.

— With assistance by Felipe Marques, and Esha Dey