Screening Hedge Funds by the Performance of their 13F Holdings
Symmetric – Which Managers had a Happy New Year?
One of the first pieces of functionality we built was a manager screener. Clients loved the individual manager profiles, but they also wanted to see how their performance stacked up against others based on the holdings of their managers disclosed through Form 13F filed with the SEC. We launched the manager screener based on their feedback, so they filter for managers by disclosed assets under management, absolute return, and StockAlpha, but it wasn’t long before clients had their way and asked us to incorporate more metrics.
Today’s email illustrates how our clients use Symmetric.io to screen managers. We’ll start by looking at the top performing managers by absolute return over the past year.
Our clients include more than a hundred funds of funds, family offices, pensions, endowments, among other institutional investors. I’m going to show how clients upload return streams and download returns analyses to excel & PDF. 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 Managers by the Absolute Return of 13F Return Streams
Symmetric clients’ first order of business was to look at all managers based on the performance of their publicly disclosed positions. To that end, we priced the performance of the 13-F holdings of all filing managers in two ways. First, we look at the absolute return of the holdings. Second, we look at the StockAlpha of these holdings. StockAlpha isolates the manager’s stock-picking skill by controlling for the performance of the market, sector, and beta of the underlying positions. We’ll examine this more later. In the meantime, we’ll look at the Absolute Return.
To begin, I’ve included a snapshot of the manager screener below. It shows the managers over a one-year window, ranked by the absolute return of their publicly disclosed book.
I’ve included the top three for the trailing year in the screenshot above. The top managers by absolute return appear to have had a terrific year. The performance of their public books each exceeded 90%. But it begs the question: were they lucky or were they smart? And is this the kind of thing that can be replicated? We turn to StockAlpha to start answering that question.
Second – Screening 13F Return Streams by StockAlpha
StockAlpha isolates a manager’s ability to pick stocks that outperform the market on a beta and sector adjusted basis. It derives from the Brinson Fachler performance attribution model and helps investors spot managers that may be charging high fees to draft an index, or worse. The Symmetric manager screener lets clients compare the historical StockAlpha performance indices of all 13F filers. It’s a complicated calculation made simple through our technology. Have a look at the screenshot below.
I’ve included three of the top managers and also introduced two manager specific filters. The StockAlpha performance figures are lower than the absolute return, for StockAlpha nets out the performance of the market, beta, and sector effects. In this case, I also selected for managers that disclose more than $2b in holdings and have fifty or fewer positions, so we could see meaningful managers with more concentrated portfolios that exhibit stock-picking skill — StockAlpha.
Third – Creating a Portfolio of Top Hedge Fund Managers
Once you have screened according to your criteria, you can add the managers you find most attractive to a portfolio. It’s simple. Just select them from the box to the right of each entry and click, add to a portfolio. I’ve included a screenshot below.
In this case, I screened for hedge funds that exhibit the strongest Tech StockAlpha with at least $1b in disclosed position-value across seventy five or fewer positions and over a three year window. This gives us a little more data to go on, so you can assess StockAlpha based one multiple annual periods. I then picked the top three and clicked Add to Portfolio, which triggered the pop-up, so I can create a new portfolio or add them to one I’m already tracking. Note the lower return figures. Part of this reflects the amazing year tech had. Now that these managers are in a portfolio, you can download their positions to excel, look at overlap, see the key drivers of returns, factor exposures, etc. Or you can look at the individual managers and pull down the proprietary PDF reports.
And That’s How You Can Screen Hedge Fund Managers Across Different Metrics Through Symmetric
We also provide a similar analytic framework for portfolios of managers. These could be hedge funds or other managers. We can get into that later, but please reach out if you are interested in individual manager analysis, analysis of portfolios of managers or anything at all.
Again, there are many other ways we provide insights into hedge fund performance. Many of these rely on our cleaned, survivorship unbiased 13F holdings data from the Symmetric platform. 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.