Understanding Exposure to Hedge Fund Crowding

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Understanding Hedge Fund Crowding

Today marks the deadline for all investment managers with more than $100m in US equity holdings to file a form 13F. One thing many of our clients track is crowded hedge fund positions. Hedge fund crowding is also something we’ve done a lot of work on to help make it more useful in building portfolios and managing risk. As of tomorrow, the hedge fund crowding scores for all institutionally held securities will be available on Symmetric.io.

Today’s email is targeted toward helping clients filter for hedge fund crowding on a position-level basis.

Our clients include more than a hundred funds of funds, family offices, pensions, endowments, among other institutional investors. I’m going to show two ways to review hedge fund crowding on a security-level basis. There are many others — some clients actually buy our data-feeds, including the holdings and proprietary, behavioral factors. But we’ll stick with two examples from the web for now.

First – Screening for Crowded Hedge Fund Positions

You can screen for crowded hedge fund positions a manager’s positions in three simple steps. First, click on the Screener tab at the top of the dashboard when you’re logged in. Second, select the Stock Screener option. This will bring you to the page illustrated below. I’ve left the Stock Screener option open, so you can see it.
Hedge Fund Crowding

Lastly, when you’re on the Stock Screener page click on the triangle next to Crowdedness Score. It sort the table accordingly and show you the most crowded positions. In this example, I’ve taken the additional steps of filtering for stocks with more than $4b in institutional market cap and sorting by the Change in Crowdedness, so you can see which positions increased their exposure to hedge fund crowding the most. You can slice the data further by sector, consensus or the popularity of a position among hedge funds, and price moves.

Check in after the 13F filings have been processed to see the most recent calculations.

Second – Evaluating Hedge Fund Crowding on an Individual Stock Basis

Our next example shows crowding analysis of an individual stock. Each stock has a page in Symmetric.io. It includes the holders, classifications of holders, exposure to fundamental and technical factors and the change in Hedge Fund Crowding and Consensus or Popularity among Hedge Funds over time. It’s easy, just go to the search screen and type in a company. In this case, I’ve navigated to Tableau Software (Ticker: DATA).

Symmetric Hedge Fund Crowding

The illustration above shows a group of tables. At the top left, you can see the Holder Based Factor exposure. These include summaries on DATA’s exposure to hedge fund crowding, consensus, stress, and “fast money.” In this case, you can see that it is a crowded position that is also popular with hedge funds. That means that hedge funds hold, on a relative basis, a lot of the institutional float, and it’s not just a couple. It represents a larger than average group of hedge fund holders. It has concentrated hedge fund ownership and popular among hedge funds, in general. The next table shows the stock’s exposure to traditional fundamental and technical factors, such as momentum, growth, etc. In this case, it has a high beta with medium exposure to Price/Cash Flow. Moving along, you can see the chart with historical Crowding and Consensus scores. Popularity has been going up, but concentration (crowding) has been going down. Here’s the consensus chart for comparison.

Symmetric-Hedge-Fund-Crowding-Popular-Consensus-Position

 

Below the top row of tables, you will find details on the underlying holders. These include classification by holder-type, such as Tiger Cubs, Activists, Quants, Event Oriented Managers, among others. Moreover, each holder listing contains their complete history of positions, buys and sells.

And That’s How You Screen for Crowding Exposure of Individual Stocks Through Symmetric 

Again, there are many other ways we provide insights into hedge fund crowding, consensus, among other measures. Many of these rely on our cleaned, survivorship unbiased 13F holdings data from the Symmetric platform. We do provide PDF Reports on Hedge Fund Crowding for each manager. These show the manager’s exposure to Hedge Fund Crowding and comparison to a peer group. Some clients, such as our quantitative investor clients, will also buy our underlying data-feeds. Please feel free to get in touch if you have any questions or would like us to drill down on any specific areas of functionality.