Hedge Fund Transparency: Careful what you wish for…

Oct 7th, 2010 | Filed under: Academic Research, Featured Post, Today's Post | By:
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With a reputation for secrecy and a penchant for confidentiality, the hedge fund industry hasn’t yielded a bumper crop of empirical data for researchers to feast on.  One of the few square meals academics have been able to find is the ubiquitous 13F filing.  Regular readers of this website are familiar with our rich vein of hedge fund data.  Although these quarterly SEC filings cover only large long equity positions held by hedge funds (and all other institutional investors), they provide a rare insight into the skill of hedge fund managers.  This study, for example, uses 13F’s to judge whether hedge fund managers mis-mark their equity positions.  This one concludes that despite what you might expect, investors do not mimic Warren Buffett’s 13F filings.  Another tries to do a sanity-check on hedge fund databases.  And this guest contributor uses 13F filings to mimic the holdings of hedge fund managers.


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  1. Interesting research paper. It’s too bad the authors chose to include every filer in the TASS database in their analysis. This gives no consideration for a filer’s investment approach as it has been demonstrated time and again that when investing based on 13F filings, it matters a great deal who you are following. Also their conclusion on “front running” is derived from looking at a single large hedge fund – hardly a sample size you can derive conclusions from. In any case, their conclusions around excess returns and existence of persistence in returns is based on holding a manager’s entire disclosed portfolio after the disclosure date. They would have been well served to instead ocus on a filer’s LARGEST positions and LARGEST new positions. Care in filer selection and a greater focus on large positions which by the way are much harder to “front run” or obfuscate and which represent a vastly different degree of conviction would have yielded vastly different results. Anyone who has used AlphaClone for the past couple years will tell you that the long term investor is exactly who benefits from following hedge fund public disclosures. The preponderance of research on this subject supports that conclusion – you can link to several research papers in the Help Center on our site.

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