YWR: Hedge Fund Holdings Analysis
Do you want to know something terrible?
Well good, but terrible if you are a hedge fund?
NASDAQ is +1% MTD….and +20% YTD.
This V-shaped rebound off the lows is a train smash for CTA and Volatility control funds. Sell low-buy high.
If the market is stable/up over the next month CTA’s and Volatility control funds will mechanically buy back everything they sold 3 weeks before at a higher price. Goldman estimates this could be $75-100bn buying tailwind over the next month. I can’t imagine the newsletters.
In July’s Hedge Fund positioning review we flagged CTA and Vol-Control fund positions looked extended and were getting sucked into the low vol upward grind in the S&P.
The fact that there was such a clear positioning set-up for the August sell-off helps make the crash less sinister. Just a huge swath of mindless quant strategies doing the same thing and getting smashed together.
And now chasing it back up again. With everyone gaming them along the way.
How consensus is your hedge fund?
Every month we analyse the top 21 equity holdings across 332 hedge funds with stated public equity holdings over $1bn.
The Top 21 list is mostly the same, but Spotify, Thermo Fisher, GE Vernova (power spinoff) and Adobe are new.
Alphabet (both share classes) has fallen from 108 last month to 90. Clearly, some funds getting antsy about the anti-trust trial.
FYI, it’s a Top 21 list because there are 2 Alphabet share classes and it’s a highly owned position.
The Hedge Fund Tech Underweight.
It seems HF’s are overweight tech when you look at the Top 20 positions, but on a market value basis and relative to the S&P500 hedge funds are highly underweight the tech sector.
According to GS Prime data Hedge funds are 16% allocated to tech compared with 30% for the S&P 500. This creates a large 14% absolute underweighting.
It’s a good indicator NASDAQ will continue to outperform.
The Most Consensus Fund Awards
When we look which hedge funds are the most consensus, ie their Top 20 holdings most closely match the Top 21 for the group, there are a few notable changes.
Marshall Wace is now #2 in the world with 12 of their Top 20 holdings in Top 21 list. 12 is an extreme achievement.
Millennium, which use to always be Top 3 has dropped to #14.
Why did Millennium have such a big shift?
Below we look at how Millennium’s holdings changed since earlier in the year. They sold Alphabet, Micron, Eli Lilly and Mastercard. That must have been hard. Those are key stocks loved by hedge funds.
And they bought Wells Fargo, Bank of America, Walmart, and a Bitcoin Fund. They must know the new theme I’m working on.
At the bottom of the post is a link to the source data file with Top 20 equity security names for 1000 funds.
Top Non-Consensus Ideas
The Top 21 is interesting, but we also like to see what the mavericks are buying. These are non-consensus funds where their Top 20 holdings have zero overlap with the Top 21 list. We loop through these funds and look for their most popular ideas.
It’s always a lot of biotech every month, but DS Smith sticks out. It’s a UK packaging company.
Royal Caribbean…..sheesh…that’s been massive.
Capital One…they acquired Discover Card in February and are building out a ‘Digital First’ national retail bank. Is this a US version of Capitec?
YWR Theme Checker
Number of hedge funds with a Top 20 Position in:
SPDR Gold Trust: 3
Anglogold Ashanti: 0
Unicredit: 3
Barclays: 3
Santander: 0
Alibaba: 9
Tencent: 7
Las Vegas Sands: 1
Kawasaki Heavy: 1
Swire Pacific (A or B) or Swire Properties: 0
Total Energies: 2
The Bigger you get the More Consensus you get.
Clear correlation that the bigger a fund gets, the more its Top 20 positions are large cap tech (The Top 21 list).
Below is a link to the source data file with Top 20 holdings data for over 1,000 funds as of August 19th.
It is sorted by stated public equity assets.
Take a look at your favorite funds and what they own.
Note: These are publicly filed equity positions. It doesn’t show what a fund might be doing with options overlays, convertible bonds, or futures.