2 > Hedge Fund Holdings Review: Q3 2013
For decades, investment professionals have con-sidered hedge fund managers the “smart money” on Wall Street. Over the long term, hedge funds have tended to outperform traditional benchmarks on a risk-adjusted basis, so their reputation seems justiﬁed. Still, until recently, assessment of hedge fund trading in speciﬁc sectors and securities has been limited to a few select managers at a time, and less has been done to gauge the growing in-dustry’s direction as a whole. Recent advances in data collection and analytics coupled with deeper global public disclosure re-quirements allow for more robust study and close monitoring of hedge fund managers’ positioning. In this publication, we track developing trends in hedge fund equity holdings. In addition, we analyze the most popular and highest-concentrated names in hedge funds and relate this to out-performance of the broader market as well as study the biggest drivers of returns for the industry.
Background on Data
Governments around the globe require institu-tional and individual investors to ﬁle and disclose certain holding information for varying purposes. In the U.S., the SEC requires ﬁnancial institutions to ﬁle Forms 13F, 13G and 13D. The Japanese 5% Shareholders ﬁling requirement is similar to the 13G ﬁling. Like American 10k, 20F and proxy ﬁlings, British Registers requirements reveal ownership positions. British insider ﬁlings include Forms 3, 4, 5 and 144, and the U.K.’s Regulatory News Service (RNS) publishes insider holding information. Similar disclosure rules also exist in other major ﬁnancial markets and provide public holdings information. Novus has aggregated, normalized and analyzed data from all of the aforementioned sources and many more to build the Novus Global Holding Database. Furthermore, we have selected a highly repre-sentative group of hedge funds sourced from the Novus Database and constructed the Hedge Fund Portfolio (HFP), a non-investable portfolio avail-able to clients for closer analysis via the Novus Platform. This portfolio is the basis for our study. The indices we discuss later in the study are sub-sets of HFP and are also non-investable. For the purposes of this study, we limited our analysis to just the public long global equity positions disclosed by managers in HFP as well as those that most drove performance for the third quarter of 2013. The reasoning for trades that we outline here is conjecture and based exclusively on public information.
An investable instru-ment from a single issuer. This may also be referred to as a “name,” “stock” or “company.” A security is associated with a return that is independent of managers’ investment.
A capital allocation by a manager to a security. Each separate allocation is a unique position.
The excess return of a fund, strategy index or invest-ment relative to the return of the benchmark over a certain period.
A criterion for classiﬁcation. Examples include country, sector or market cap.
The sum of all mar-ket values in a speciﬁc category. Exposure can be expressed as a dollar amount or as a percent-age of total portfolio value.
A management company with one or more long positions. Also referred to as a “manager.”
The number of institutions disclosing long po-sitions in a speciﬁc security.
The expression of an investment thesis through one or more positions.
Hedge fund interest:
The number of shares of all dis-closed long positions from the selected hedge fund group as percent of shares outstanding for a speciﬁc security.
Reported asset value (RAV):
The sum of market value of all disclosed long positions for a certain manager.