Crowded hedge fund trades: Why the rules changed in ‘07
Dec 20th, 2007 | Filed under: Hedge Fund Industry TrendsEarlier this week, we told you about a recent European Central Bank report containing some research on correlations between hedge funds. Since position-level analysis is very difficult, researchers used the average cross-correlation between hedge funds following similar investment strategies. A high average correlation was interpreted as meaning that hedge funds had likely pursued the same underlying trades.
Position-level data may indeed be next to impossible, but not quite. In the United States, hedge funds are required to file a quarterly form called a “13f” that contains their common shares, convertible preferred shares and convertible bond holdings (long positions only). While the data is somewhat stale (managers have 45 days after quarter-end to submit the report), it provides some interesting insight into so-called “crowded” hedge fund trades.
In a report issued to clients on August 27, 2007, Thomson Financial analyzed the largest US holdings of the top 25 biggest hedge funds in the United States. Collectively, this group managed slightly over US$400 billion. According to Thomson, over 3% of these assets were invested in Sears Holdings (although they acknowledge that most of that may be ESL). The list of 25 also includes names such as Autozone, CVS, Google, Alcoa and RIM.
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Do you know if these indexes can still be found anywhere under a different name? I cannot find them under these tickers on bloomberg. i would like to find them?