Jump to section:
Background
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.
Methodology
Data
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 GOOG stock for a quarter. If GOOG 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.
Key Positions
StockAlpha skill provides Symmetric with a window on two drivers of hedge fund returns. First, it shows which stocks are driving StockAlpha for the top twenty stock-pickers. These are the stocks that contribute the most to the actual StockAlpha of the group since the release of the most recent quarterly filings. Ranked overall, Symmetric publishes the top-ten.
Symmetric also provides a view on what the top stock-pickers had been doing recently. These moves entail new positions, increased positions, and exited positions. The top-five positions for each category are calculated by looking at the top twenty stock-pickers and aggregating the top five of each.
These two views entail the key positions and recent activity sections in the Quarterly Symmetric Rankings
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 only about half of managers have generated positive stock picking skill. StockAlpha has been particularly difficult to demonstrate over the past year. Over that period, only 20% of managers have demonstrated positive StockAlpha; this means that only 20% of managers were able to pick stocks that outperformed their sectors. The average manager over the last year has demonstrated negative 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 in the current quarter, 1 year back and three years back. The list is further adjusted to reflect those whose StockAlpha reflects not only the greatest magnitude, but also the greatest consistency over each period. These rankings are calculated overall and for each of the underlying industry sector that hedge funds are invested in.
Overall StockAlpha - 1st Quarter 2015 Symmetric Twenty
| Rank | 3yr Annualized StockAlpha | Name | Founder | Reg AUM (MM) | % of Reg AUM covered by public portfolio |
|---|---|---|---|---|---|
| 1 | 14.5% | Soroban Capital Partners Llc | Eric Mandelblatt | 7,560 | 99% |
| 2 | 12.5% | Starboard Value Lp | Jeffrey Smith | 2,570 | >100% |
| 3 | 12.2% | Matrix Capital Management | Jay Hattori | 2,090 | 90% |
| 4 | 12.% | V3 Capital Management Lp | Charles Fitzgerald | 320 | 95% |
| 5 | 10.8% | Scopia Management Inc | Jeremy Mindich | 7,107 | 54% |
| 6 | 9.9% | Hound Partners Llc | Jonathan Auerbach | 3,004 | >100% |
| 7 | 9.1% | Pershing Square Capital Mgmt | William Ackman | 15,213 | >100% |
| 8 | 8.6% | Corvex Management Lp | Keith Meister | 8,176 | 87% |
| 9 | 8.3% | Steadfast Capital Management | Robert Pitts | 8,168 | 79% |
| 10 | 8.1% | Abrams Bison Investments Llc | Gavin Abrams | 2,060 | 72% |
| 11 | 7.8% | Senator Investment Group Lp | Alexander Klabin & Douglas Silverman | 10,943 | 81% |
| 12 | 7.5% | Force Capital Management Llc | Robert Jaffe | 1,188 | 46% |
| 13 | 6.7% | Locust Wood Capital Advisers Ll | Stephen Errico | 782 | 97% |
| 14 | 6.1% | Echo Street Capital Mgmt Llc | Gregory Poole | 1,699 | 95% |
| 15 | 6.% | Highfields Capital Management | Jonathon Jacobson | 22,705 | 51% |
| 16 | 5.3% | Valinor Management Llc | David Gallo | 4,344 | 90% |
| 17 | 4.9% | Makaira Partners Llc | Thomas Bancroft | 691 | 82% |
| 18 | 3.6% | Coatue Management Llc | Philippe Laffont | 14,384 | 73% |
| 19 | 3.2% | Viking Global Investors Lp | Ole Halvorsen | 39,896 | 55% |
| 20 | 3.1% | Archon Partners Llc | Joseph Sheehan | 495 | 77% |
Technology StockAlpha - 1st Qtr 2015 Symmetric Top 5
| Rank | 3yr Annualized StockAlpha for Sector | Name | Founder | Reg AUM (MM) | % of Reg AUM covered by public portfolio |
|---|---|---|---|---|---|
| 1 | 18.6% | Starboard Value Lp | Jeffrey Smith | 2,570 | >100% |
| 2 | 17.4% | Matrix Capital Management | Jay Hattori | 2,090 | 52% |
| 3 | 14.8% | Blue Harbour Group Lp | Clifton Robbins | 2,203 | 50% |
| 4 | 14.5% | Valinor Management Llc | David Gallo | 4,344 | 90% |
| 5 | 10.5% | Spo Advisory Corp | John Scully | 10,688 | 47% |
Healthcare StockAlpha - 1st Qtr 2015 Symmetric Top 5
| Rank | 3yr Annualized StockAlpha for Sector | Name | Founder | Reg AUM (MM) | % of Reg AUM covered by public portfolio |
|---|---|---|---|---|---|
| 1 | 56.1% | Pershing Square Capital Mgmt | William Ackman | 15,213 | >100% |
| 2 | 29.9% | Ra Capital Management Llc | Peter Kolchinsky | 1,481 | 90% |
| 3 | 10.8% | Bridger Management Llc | Roberto Mignone | 3,112 | >100% |
| 4 | 10.6% | New Mountain Vantage Advisers L.L.C. | Adam Collins | 2,443 | 90% |
| 5 | 8.6% | Apex Capital Llc | Sanford Colen | 1,946 | 70% |
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 Dec 31st, 2014. These are organized according to the top 10 positions that contributed the most in aggregate to the StockAlpha of the top twenty stock-pickers from Dec 31st, 2014 to present. These are the winners that helped pushed the Symmetric Twenty forward most recently.
Symmetric Twenty's Top Ten Most Profitable Bets 1st Qtr 2015
| Rank | Ticker | Name of Stock | Fund(s) | Average Position Size | 1Q15 Return of Stock vs. Sector |
|---|---|---|---|---|---|
| 1 | SPR | Spirit Aerosystems Holdings Inc. Class A | Hound, Scopia | 19% | 14% |
| 2 | NFLX | Netflix Inc | Coatue, Matrix | 8% | 33% |
| 3 | FCE.A | Forest City Enterprises Inc. Class A | Scopia, V3 | 10% | 20% |
| 4 | WMB | Williams Cos. (The) | Corvex, Senator, Soroban, Steadfast | 11% | 6% |
| 5 | VRX | Valeant Pharmaceuticals International Inc (ONT) | Archon, Hound, Locust, Viking | 5% | 13% |
| 6 | LNKD | Linkedin Corporation | Coatue, Matrix, Steadfast | 7% | 14% |
| 7 | AGN | Allergan Inc. | Corvex, Highfields, Pershing, Senator, Steadfast | 9% | 5% |
| 8 | MWV | MeadWestvaco Corporation | Starboard | 14% | 16% |
| 9 | AAPL | Apple Inc | Archon, Coatue, Locust | 5% | 12% |
| 10 | ACT | Actavis Plc | Archon, Coatue, Corvex, Senator, Steadfast | 4% | 7% |
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
| Rank | Ticker | Name of Stock | Fund(s) | Average Position Size | 1Q15 Return of Stock vs. Sector |
|---|---|---|---|---|---|
| 1 | QSR | Restaurant Brand | Pershing | 9% | -3% |
| 2 | SPLS | Staples Inc. | Starboard | 9% | -11% |
| 3 | WBA | Walgreen Co | Highfields, Viking | 4% | 2% |
| 4 | ST | Sensata Technologies Holding NV | Hound, Soroban | 4% | -1% |
| 5 | LC | Lending Club | Coatue, Valinor | 4% | -15% |
Symmetric Twenty's Top Five Recent Increased Positions
| Rank | Ticker | Name of Stock | Fund(s) | Average Increase in Position Size | 1Q15 Return of Stock vs. Sector |
|---|---|---|---|---|---|
| 1 | TWC | Time Warner Cable Inc. | Highfields, Soroban | 10% | -5% |
| 2 | ZTS | Zoetis Inc. | Force, Highfields, Pershing | 10% | 2% |
| 3 | BUD | Anheuser-Busch Inbev SA ADR | Corvex, Soroban | 6% | 6% |
| 4 | CBS | CBS Corp. (DE) Class B | Coatue, Corvex, Highfields, Soroban | 2% | 4% |
| 5 | NFLX | Netflix Inc | Coatue, Matrix | 6% | 33% |
Symmetric Twenty's Top Five Closed Positions
| Rank | Ticker | Name of Stock | Fund(s) | Average Position Size Before Exit | 1Q15 Return of Stock vs. Sector |
|---|---|---|---|---|---|
| 1 | HCA | HCA Inc. (New) | Force, Senator | 4% | -10% |
| 2 | APC | Anadarko Petroleum Corp. | Corvex, Senator, Valinor | 3% | 5% |
| 3 | SWAY | Strwd Wypnt Rsdt | Locust, V3 | 4% | -9% |
| 4 | HES | Hess Corp | Locust, Steadfast | 3% | 0% |
| 5 | WYN | Wyndham Worldwide Corp. | Locust, Valinor | 3% | +2% |