Q3 2015 Symmetric Hedge Fund Rankings Report
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Symmetric provides the public reference-point for hedge fund investment skill. Some of the most sophisticated hedge fund allocators (hedge fund of funds, family offices, endowments) and financial advisors incorporate the analysis and rankings for due diligence and on-going monitoring of their hedge fund investments.

Many equity managers market themselves on their ability to pick individual stocks and are paid 2 and 20 for this skill, but it is often difficult to look at a hedge fund's overall returns and know how much of that came from stock picking.

Symmetric begins with a historical database of hedge fund holdings across a universe of more than one thousand funds. By observing how these holdings change and perform over time, we can assess the underlying skill of the investor and attribute it to their ability to pick stocks or sectors and size positions.

Symmetric's rankings are unique in the industry because they are based on isolating manager skill as opposed to returns. Overall hedge fund returns are driven by a number of factors including stock picking, sector picking, net long/short exposure, leverage, etc. All these factors drive returns, but managers are typically paid high fees of two-and-twenty for their stock picking skill or StockAlpha.

Symmetric's rankings are the first in the industry to isolate stock picking alpha and publicly rank hedge funds based upon that metric. The platform's analysis provides a framework to force-rank each hedge fund manager. The rankings illustrate the relative skill of equity long-short managers express, the most important of which is picking stocks.

The Quarterly Symmetric Stock Pickers Rankings recognizes those managers that are exceptional stock-pickers overall and by sector and the key investments themes that drive the industry. More importantly, it introduces the transparency with which ordinary investors can see the best possible publicly driven analysis of hedge fund decision-making and performance.



Symmetric begins with a historical database of hedge fund holdings across a universe of more than one thousand funds harvested from regulatory filings. Because hedge funds are required to file with the SEC, using regulatory filings to calculate rankings controls more effectively for survivorship bias compared to hedge fund analysis that depends upon self-reporting. By observing how these holdings change and perform over time, we can assess the underlying skill of the hedge fund and attribute it to their ability to pick individual stocks.

Measuring StockAlpha

StockAlpha measures a hedge fund manager's ability to pick stocks that outperform their corresponding sector. The commonly used Brinson-Fachler performance attribution methodology provides the foundation for the Symmetric approach. Intuitively, our approach is equivalent to calculating the performance of a portfolio in which each individual stock position is hedged with a sector index to create a market neutral and beta neutral portfolio. The return of that hedged portfolio corresponds to the manager's stock picking skill and is what we call StockAlpha.

The rough intuition behind how this is calculated is as follows: let us assume that a hedge fund manager held Apple stock for a quarter. If Apple rallied 10% over that quarter at the same time as when the technology sector rallied 7%, much of that 10% return may have been coming from the sector. The manager in this instance picked a great sector, which is worth ~7%, but the manager's ability to pick stocks that outperform its peers is ~3% (10% minus 7%). We define StockAlpha as one's ability to pick a security that outperforms its sector.

To calculate StockAlpha, a managers' long positions are first harvested from 13-F filings on a quarterly basis. The quarter-end sample forms the basis of a return-series that assumes the manager is able to trade in and out of the new and old positions at security prices at the end of each quarter. We calculate the return of the publicly disclosed portfolio and the resulting return series is called the "actual return of the publicly disclosed portfolio."

Next, we map each security in the publicly disclosed portfolio to a sector according to a standard industry mapping. We calculate the beta of each stock to its corresponding sector using daily price data with a one-year look-back. The betas adjust the exposure to each sector index required to hedge the individual stock. Based upon this mapping, we calculate the return of a "proxy portfolio" that captures how much of the "actual portfolios" returns come from the sectors that those stocks happened to be in.

The difference between the actual return of the publicly disclosed portfolio and the proxy portfolio each quarter is the StockAlpha of the manager for the quarter. The sum of the trailing four or twelve quarters, respectively, are the StockAlpha for the year or the past three years.

The Symmetric Twenty - Ranking the Top Skilled Investors

StockAlpha Across the Hedge Fund universe

Stock picking is difficult. The distribution of StockAlpha shows that over the past three years just over half of managers have generated positive stock picking skill. StockAlpha has improved over the past quarter, though. For the trailing twelve months, 50% of managers have demonstrated positive StockAlpha; this means that only 50% of managers were able to pick stocks that outperformed their sectors. But this is a meaningful improvement from our previous report, in which only 40% had delivered positive StockAlpha over the previous twelve months. Nonetheless, the average manager over the last year has demonstrated negative StockAlpha.

Symmetric Distribution of Skill Q3 2015

Symmetric Top 20 Cumulative StockAlpha vs. HF universe Cumulative StockAlpha

The Symmetric Twenty comprise the top twenty ranked long-short equity managers. We force-rank the entire Symmetric universe according to their realized StockAlpha year to date, 12 months back and three years back. The list is further adjusted to reflect those whose StockAlpha has not only the greatest magnitude, but also the greatest consistency over each period.

The following chart shows the cumulative StockAlpha for the Symmetric Top 20 vs. cumulative StockAlpha for the entire hedge fund universe. The chart demonstrates the magnitude of dispersion between the best and most consistent stock pickers and the average stock pickers. The Symmetric Top 20 have added over 25% of StockAlpha above the average hedge fund over the past 3 years or roughly 8% a year. With hedge fund fees typically being around 2% of assets and managed and 20% of profits, its clear that only the very top stock pickers are worth paying for. The average hedge fund would return negative StockAlpha after fees.

Cumulative StockAlpha Symmetric Top 20 vs. HF average

Overall StockAlpha - 3rd Quarter 2015 Symmetric Twenty

NameFounder3 Yr StockAlpha Magnitude3 Yr StockAlpha Sharpe
Broadfin Capital LlcKevin Kotler24.17%1.15
Brave Warrior Advisors LlcGlenn Greenberg17.34%2.17
Matrix Capital ManagementDavid Goel16.7%2.
Whale Rock Capital ManagementAlexander Sacerdote15.76%1.12
Hound Partners LlcJonathan Auerbach14.34%2.07
Dorsal Capital Mgmt LlcRyan Frick12.33%1.23
Ancient Art LpQuincy Lee11.51%1.16
Pershing Square Capital MgmtWilliam Ackman10.14%1.09
Bridger Management LlcRoberto Mignone9.88%1.11
Newbrook Capital Advisors LpRobert Boucai9.86%1.61
Tremblant Capital GroupBrett Barakett7.63%1.11
Marble Arch Investments LpRobert Mclellan & Timothy Jenkins7.51%1.12
Pointstate CapitalZachary J. Schreiber7.21%1.56
Southpoint Capital Advisors LpJohn Clark7.16%1.55
Eton Park Capital ManagementEric Mindich6.85%1.64
Echo Street Capital Mgmt LlcGregory Poole6.12%1.38
Viking Global Investors LpOle Halvorsen6%2.
Akre Capital ManagementCharles Akre5.71%1.96
Antipodean Advisors LlcEric Chen5.1%.9
Ascend Capital LlcMalcolm Fairbairn4.66%1.19

Key Highlights - 3nd Qtr 2015 vs. 2nd Qtr 2015

Funds entering the list:

  • Ancient Art Helped by 13% position in GOOG and 8.3% position in XOOM

  • Bridger Management: Helped by 3.5% position in MPC and 4.2% position in MDCO

  • Eton Park: Helped by 7% position in GOOG and 5.8% position in AWI

Funds exiting the list:

  • Corvex Hurt by 6% decline in YUM over past 2 months (15% of portfolio)

  • Senator Investment Group

  • V3 Capital Management

A few of the several funds have been on the list for multiple quarters:

  • Broadfin

  • Brave Warrior

  • Hound

Symmetric Rankings - Key Positions

StockAlpha Across the Hedge Fund universe

Each stock picker owes their success to their underlying positions. We looked at the key positions that have driven their stock-picking success since March 31st, 2015. These are organized according to the top 5 positions that contributed the most in aggregate to the StockAlpha of the top twenty stock-pickers from June 30th, 2015 to present. These are the winners that helped pushed the Symmetric Twenty forward most recently.

Symmetric Twenty's Top Five Most Profitable Bets 3rd Qtr 2015

RankTickerName of StockFund(s)Average Position Size3Q15 Return of Stock vs. Sector
1VRXValeant Pharmaceuticals International Inc (ONT)Antipodean, Ascend, Brave, Hound, Marble, Pershing, Viking17%10%
2NFLXNetflix IncAntipodean, Matrix11%29%
3GOOGGoogle Inc. Class CAncient, Eton, Viking, Whale6%24%
4APDAir Products & ChemicalsAntipodean, Echo, Marble, Newbrook, Pershing5%12%
5GOOGLGoogle Inc. Class AAscend, Newbrook, Pointstate, Viking, Whale3%25%
6AMZNAmazon.com Inc.Newbrook, Pointstate, Tremblant, Viking, Whale4%20%
7TSOTesoro Petroleum CoAscend, Hound5%31%
8QSRRestaurant BrandAntipodean, Hound, Matrix, Newbrook, Pershing5%10%
9ELLIEllie Mae Inc.Dorsal, Tremblant, Whale5%14%
10LNGCheniere Energy IncAntipodean, Newbrook, Pointstate, Viking6%6%

Investors holding a basket of hedge funds can often end up with exposure to just a few key bets. Of particular note on the list is Valeant Pharmaceuticals (VRX) which is currently owned by 7 of the Symmetric Top 20 and has driven a sizable portfolio of the alpha generated by the Symmetric Top 20. Symmetric's position overlap and portfolio monitoring shows who is relatively early to an idea vs. those who came later. The table below shows the popularity of VRX amongst the Symmetric Top 20 and when each hedge fund entered the trade.

Position Crowdedness history of VRX

Symmetric Rankings - Recent Activity

What have the Skilled Investors been doing?

Skilled investors separate themselves from the hedge fund universe through their stock-picks. Unlike the picks of the universe overall, these picks are those that drive the top performers. We highlighted the positions skilled investors initiated, accumulated and exited recently.

Symmetric Twenty's The Top Five Recent New Positions

RankTickerName of StockFund(s)Average Position Size3Q15 Return of Stock vs. Sector
1GOOGGoogle Inc. Class CAncient, Eton, Viking, Whale10%24%
2AGNAllergan Inc.Ascend, Bridger, Viking4%3%
3DTVDIRECTV Corp.Eton12%-1%
4CTRXCoTherix Inc.Eton10%%
5FOX21st Century Fox Inc. Class BAncient, Southpoint8%-10%

Symmetric Twenty's Top Five Recent Increased Positions

RankTickerName of StockFund(s)Average Increase in Position Size3Q15 Return of Stock vs. Sector
1NFLXNetflix IncAntipodean, Matrix9%29%
2MSFTMicrosoft Corp.Ascend, Brave, Dorsal, Eton7%4%
3AMTAmerican Tower Corp. Class AAkre, Dorsal, Echo, Matrix3%6%
4IACIIAC/InterActiveCorpAntipodean, Dorsal, Pointstate, Whale3%-9%
5QSRRestaurant BrandAntipodean, Hound, Matrix, Newbrook, Pershing2%10%

Update on Activists

Activist Investors add negative value over past few months

Activist investors delivered negative StockAlpha over the past few months in line with the average equity L/S HF. Activists are not industry-specialists, but their stock-picks have outperformed the corresponding sectors over the last few years despite the recent poor alpha generation. The chart below cumulative StockAlpha of a basket of 15 activist funds vs. the cumulative StockAlpha of the average hedge fund. The reason for the recent underperformance was varied:

  • Third Point: Hurt so far in August by 30% decline in SUNE (3.6% position) and 5% decline in AMGN (13% position)

  • Sachem Head: Hurt in July and August by 14% decline in CDK (45% position) and 5% decline in ACT this month

  • Starboard Value Hurt by 7.6% decline in ODP in July (12% position)

  • Sandell Asset Management Hurt by 15% decline in BKD (11% position) over July and August

Cumulative StockAlpha Symmetric Top 20 vs. HF average

Hedge Fund Ownership of Recent IPOs

How have Hedge Fund Managers Taken to IPOs?

Hedge Fund managers have also participated in many recent IPOs. Our holdings analysis evaluated the aggregate flow of funds for the position from the first quarter through the end of the second quarter. We looked at select IPOs in the past quarter and also reviewed the flow of funds of recent high-profile IPOs.

Our follow-up analysis of recent high profile IPOs, such as Ali Baba, Lending Club, Shake Shack, OnDeck, and BOX showed mixed results. Ali Baba continued to lose hedge fund ownership, declining 16.6% on a flow-of-funds basis and losing ten hedge fund owners, from 113 to 103. Lending Club, on the other hand, gained five hedge fund owners, rising to 32 and increasing 5.14% on a flow of funds basis.

Our evaluation of select Q2 IPOs focused on Fitbit, Etsy, GoDaddy, and Shopify. The most popular IPO among these was FIT, which has twice the number of hedge fund holders as SHAK and as many as LC. ETSY is the least popular hedge fund holding, among the sample.

A full table of holdings, flow of funds and ownership data is below.

Ticker Value of Current Ownership ($) Chg in Shares Owned by HFs (Mar-31 to June-30) # HF Owners (Mar-31) # HF Owners (June-30)
BABA 7,041 MM -16.63% 113 103
LC 528 MM 5.14% 27 32
ONDK 227 MM 10.88% 17 14
SHAK 36 MM 27.34% 9 16
BOX 48 MM -8.15% 13 13
HUBS 46 MM 4.60% 15 15
YDLE 23 MM 27.30% 10 13
ETSY 188 MM 0 10
FIT 253 MM 0 32
SHOP 50 MM 0 18
GDDY 1,195 MM 0 25