SAN FRANCISCO--()--Established hedge fund managers tracked by the AlphaClone Hedge Fund Long/Short Index distanced themselves from Financial sector investments in the second quarter, representing a steep reversal from the previous quarter in which Financials were the index’s most overweight sector relative to the S&P 500.
“The bearish stance may illustrate conviction among hedge funds that Financials are fully valued at these levels, especially in light of various high profile scandals that affected the sector negatively”
“The bearish stance may illustrate conviction among hedge funds that Financials are fully valued at these levels, especially in light of various high profile scandals that affected the sector negatively,” says Mazin Jadallah, CEO of AlphaClone LLC.
Notable financial companies in which the index has sold out include Citigroup [NYSE:C], JP Morgan Chase [NYSE:JPM] and Hartford Financial [NYSE: HIG]. Despite the underweighting, Financials are still the second-largest sector represented in the index at a 13 percent allocation. Financial names the index continues to hold include Bank of America [NYSE: BAC], American International Group [NYSE: AIG] and Alleghany Corp. [NYSE: Y], with the latter representing a new index constituent.
Construction and business services sectors maintained their high relative overweights from the previous quarter, while industrial products shifted from the fifth-lowest to the fifth-highest relative weighting this quarter. Prominent construction holdings in the index include homebuilder NVR, Inc. [NYSE: NVR], while credit card firms such as MasterCard [NYSE: MA] and VISA [NYSE: V] and data-driven marketing solutions provider Alliance Data Systems [NYSE: ADS] represented some of the index’s Business Services holdings.
Computer and Technology stocks, despite a small reduction in relative exposure, account for the greatest share of AlphaClone’s index this quarter at a 21 percent overall allocation. Apple Inc. [NASDAQ: AAPL] continues to be the index’s largest single holding while Facebook Inc. [NASDAQ: FB] and TripAdvisor Inc. [NASDAQ: TRIP] were new additions.
The AlphaClone Hedge Fund Long/Short Index has returned 11.5 percent this year through August, compared to -0.59 percent for the Dow Jones Credit Suisse Core Equity Long/Short Index and 11.9 percent for the S&P 500.
The index is composed of U.S. equity securities selected based on a proprietary hedge fund position replication methodology developed by AlphaClone, LLC. The methodology ranks hedge funds and institutional investors based on the efficacy of replicating their publicly disclosed positions and selects equities from those managers with the highest ranking. To manage risk, the Index employs a dynamic hedging mechanism that can vary the index from being 100 percent long to up to 50 percent short, or “market hedged,” based on market volatility targets defined by the methodology.
To learn more about AlphaClone and available exchange traded products based on the AlphaClone Hedge Fund Long/Short Index visit www.alphaclone.com.
About AlphaClone LLC
AlphaClone is a registered investment advisor and equity research firm that is a leader in the field of hedge fund position replication. AlphaClone's investment products and solutions are derived from institutional investor public disclosures and give investors direct access to stock positions favored by established hedge funds. The firm's proven, intelligent, risk managed, portfolio construction approach seeks to provide liquid, transparent, low-fee strategies that give investors exposure to the alpha potential inherent in hedge fund investments. AlphaClone's innovative investment research and strategies are available to investors through managed accounts, exchange-traded products and an online research services. The firm is based in San Francisco, California. For more information visit www.alphaclone.com.
The AlphaClone Hedge Fund Long/Short Index represents equity securities that are favored by hedge funds and institutional investors in their public disclosures. The index is equal weighted with an overlap bias which gives a security held by twice the number of managers twice the weight. The index is reconstituted quarterly and can vary between being long only and market neutral. It is not possible to invest directly in an unmanaged index. Alpha is the abnormal return on a security or portfolio in excess of what would be predicted by an equilibrium model like the Capital Asset Pricing Model (CAPM).
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