The Long & The Short of Hedge Fund Crowding Alpha
You can learn a lot about a security based on who owns it. In fact, as has been shown in our research, some ownership-based patterns of particular securities predict the future returns of those securities.
The Symmetric crowding dataset selects long positions crowded by hedge funds and hedge fund cohorts. These are based on the Symmetric ownership dataset, which includes public holdings disclosures, qualitative research, and public market price data. Symmetric holder-classifications provide investors with a systematic approach to understanding the influence of different investor-types on an investment. This framework for analyzing securities on holder-based factors is used to assess risk and drive portfolio construction in the form of holder-based smart-beta strategies.
In this report, we will illustrate a relationship between hedge fund crowding, short interest and future returns in a given security. Combining the Symmetric hedge fund crowding and short interest factors yields an alpha stream over time while hedging against the increasingly substantial drawdowns associated with hedge fund crowding.