YWR: How Consensus is your Hedge Fund?
It’s kind of amazing when you think about it.
Out of 315 global hedge funds 99 own Amazon in their Top 20 positions.
93 own Microsoft. 92 own Google (between the 2 Alphabet share classes), Meta 64, Nvidia 55, and Apple 35.
If there is 1 thing all big hedge funds agree on its that you have to own Amazon, Microsoft and Google.
This is from for our monthly holdings analysis of global hedge funds with publicly filed equity positions >$1bn.
It’s also interesting how little the Top 21 list has changed since January. Hedge funds are locked in on big tech. They’ve learned you don’t sell these stocks.
You don’t sell Visa or Mastercard either.
GE Aerospace is new to the list and so is Berkshire Hathaway.
Alibaba dropped off (at just the wrong time).
But overall still no banks, no big energy, no mining, no autos. No UK. No Cash Dragons. None of our YWR themes (Dirty Dividends).
Most Consensus Hedge Funds
Millenium, Hudson Bay and Walley are still Top 3.
And if you look down the list and detect a correlation between size and ‘consensusness’ you are right.
The bigger the fund the more they all own the same thing.
Non-Consensus Top 40
But what are the non-consensus funds doing? I define these as funds where there is zero overlap between their top 20 and the YWR Top 21 list.
Here are the 40 most common positions amongst funds with 0 positions in the YWR Top 21.
This list changes a lot month to month. 3 is a big number for this list so Cameco stands out. The uranium theme is becoming more popular for hedge funds.
Otherwise, it’s a lot of zero coupon bonds and biotechs.
Got Gold?
Last week we talked about the gold miners and Anglogold in particular.
So how many hedge funds have gold exposure in their Top 20?
Out of 315 global hedge funds 5 own GLD. 7 Have the Van Eck Gold Miner ETF. Newmont: 3, Barrick: 0, AngloGold: 0.
Basically, almost no gold exposure in the hedge fund industry.
Got Snowflake (SNOW)?
Out of curiosity, ‘Computer, how many hedge funds own Snowflake in their Top 20?’
Answer: 5
Snowflake was a notable presenter from the AWS Conference Notes.
Arrowstreet Deep Dive
Did you realise Arrowstreet has over $100bn in AUM? They’re not 100% a hedge fund, but I was surprised to see they are the 3rd largest hedge fund on our list.
According to Pensions and Investments, Arrowstreet makes use of computer models to allow the firm to perform well in different market environments and tends to avoid systematic biases such as favouring certain stocks. The models take "non-linear" factors into account to a greater extent than its peers.
Sounds like a great marketing pitch. But let’s see the Top 20 and judge for ourselves.
Computer, please print the Top 20 holdings for Arrowstreet (remember to be polite to the AI’s. They will remember.).
boop, beep, boop, beep….
Seems fine. Some big cap-tech of course, but also lots of US banks (Wells Fargo, JP Morgan, Citi, Bank of America) , which we have been saying are going to do well.
We also see the Untouchable #7 (AT&T and Verizon).
Value Tech (CSCO, DELL) and then of our YWR Top 20 stocks from Feb (GM).
But the problem is Arrowstreet’s Top 20 include 7 of the YWR Top 21. That’s a high score.
Based our sample of 315 global hedge funds (AUM > $1bn) the average hedge fund has 2.36 Top 21 positions with a standard deviation of 2.72.
With those sample characteristics, what are the odds of having 7 consensus positions in a normal distribution?
Z-score = 1.7
1 - the Cumulative Distribution of a 1.7 Z score = 4.4%
What does this tell us?
Despite all the marketing about their quantitative systems for identifying ‘non-linear factors’ and avoiding systematic biases Arrowstreet (as of April holdings) is in the top 5% of most consensus hedge funds in the world.
Maybe they just don’t realise it.
YWR Top 20 Hedge Fund Holdings Data
Below is a link to the spreadsheet with the Top 20 holdings data for over 1,000 hedge funds.
Feel free to look up any fund and see their Top 20 filed public equity positions.
Maybe look up Sprott and see which mining stocks they like.