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Hedge Fund Trends in 2017 Thus Far

Stephen Bennett Senior Associate, Client Analytics

In this article, we'll look at some major security-level and sector-level trends developing over the previous quarter.

Only a few short weeks ago, the SEC released 13F filings for thousands of hedge funds (HFs), disclosing the March 31st holdings. Novus then validates all the numbers and identifies trends for our clients. Once we’ve collected, compiled, and analyzed this information, we feed it into our Hedge Fund Universe (HFU), a value-weighted portfolio of some 1,300 hedge fund managers identified and vetted by Novus. This portfolio provides those clients who are managers insight into positioning and trading across the industry, including sector shifts, overlap, and crowdedness.

Our preliminary analysis identified some trends to pay attention to in the coming quarter.

Event-Driven Trades

SNAP IPO: SnapChat (SNAP) had its IPO in March, and hedge funds purchased 4.3% of Shares Outstanding (S.O.). Although hedge funds don’t heavily own it on an S.O. basis, it has some large purchases from Coatue—the largest owner with 1.81% S.O.—who’s investing $472MM, followed by Glade Brook with $105MM, Discovery with $62MM, and Third Point with $50.69MM.

NXP Semiconductor’s/Qualcomm: From last quarter, we discussed the NXP Semiconductors/Qualcomm (NXPI) merger when ownership spiked from 8% to 23.38% of S.O. between Q3 and Q4. HFs increased their ownership stake up to 30.05%, driven by HBK $455MM, Pentwater $225MM, Farallon $178MM, and Soroban $165MM. Eton Park cut its position ($139MM). As the merger progresses, these managers continue to see benefits from the deal.

hedge fund trends

Time Warner/AT&T: HF ownership of TWX has increased again, rising from 9.31% to 13.02% as TWX shareholders approved a merger with AT&T in February. Canyon Capital $445MM, Farallon $348MM, Och-Ziff $302MM, and Senator $204MM all added to their positions. Fir Tree $224MM, Samlyn $103MM, and Pentwater $103MM initiated positions. Jericho ($123MM), Greenlight ($122MM), Citadel ($113MM), Mason ($70MM), and Junto ($65MM) reduced or exited their Q4 2016 positions.

hedge fund trends

T-Mobile/Sprint Speculation: Recent rumors of a TMUS merger with Sprint weren’t out yet when industry speculation—we assume—on a merger led to an increase in investment with HFs owning 8.6% of S.O. Lone Pine $386MM, Third Point $322MM, Paulson & CO $267MM, and PointState $267MM all added to existing positions. Viking ($543MM), Soroban ($237MM), Corvex ($202MM), and Coatue ($169MM) exited their positions.

hedge fund trends

DOW EU Approval: In materials, DOW won EU approval for a DuPont merger on March 27th, but U.S. approval is still pending. PointState $607MM, JANA $225MM, Senator $190MM, Och-Ziff $144MM, and Empyrean $51MM initiated positions, and Glenview $194MM added to its existing position.

hedge fund trends

CSX Activist Investment: The railroad had a busy first quarter, announcing 1,000 job cuts in February and poaching Canadian Pacific’s CEO in March. Hedge funds are following activist investor Mantle Ridge into the name, with large entries from Lone Pine $669MM, Brahman $257MM, Blue Ridge $225MM, Scopus $49MM, Conatus $34MM, and Alyeska $23MM. Funds including Citadel $267MM, Och-Ziff $139MM, Senator $107MM, PointState $100MM, Impala $14MM, and PAR $13MM added to existing positions.

hedge fund trends


The technology space and its outperformance compared to the S&P 500 continues to create buzz, but in terms of HF ownership, it remained relatively static across FAANG with Facebook (FB) and Apple (APPL) as the exceptions. Owner numbers increased slightly but not dramatically across these stocks. FB saw increased HF ownership in Q1, rising from 4.58% to 5.11%. HFs have mixed opinions here as Citadel $609MM, Farallon $366MM, PointState $364MM, Renaissance $304MM, Point72 $287MM, and Och-Ziff $155MM all added to their positions. In comparison, Viking ($456MM), Soroban ($148MM), and Lone Pine ($116MM) all reduced their positions, and Suvretta ($143MM) exited completely. APPL’s change in ownership came from DE Shaw $290MM, Citadel $259MM, Millennium $170MM, Contour $118MM, and Balyasny $115MM. Across Amazon, Netflix, and Alphabet, HF ownership was mostly reduced. Some notable reductions were LonePine in AMZN ($1146MM) and GOOG ($521MM), Viking in AMZN ($474MM), Blue Ridge in NFLX ($204MM), and Third Point and Greenlight in AAPL ($265MM and $263MM).

The recent correction in technology names may show why disparate opinions exist in these names. As we have previously discussed, more funds own these names, and some may face headwinds from poor timing, but the data doesn’t support the idea of hedge funds pouring in.

hedge fund trends

Cyber Security

Cybersecurity companies have generated increased interest, which, due to the recent randomware attack, will probably appear in filings throughout the rest of 2017 and is an investment theme to follow. Hedge funds control 13.77% of Shares Outstanding (S.O.) of Symantec (SYMC) in part due to large purchases by Lone Pine $811MM  and Coatue $526MM. Symantec is focusing on core cybersecurity, as seen by its acquisition of Blue Coat (cloud security) and its sale of Veritas (data storage) in 2016. Palo Alto Networks(PANW) saw increased HF ownership in Q1 from 10.13% to 14.22% with large additions from Citadel $216MM, Alyeska $139MM, and Cadian $85MM. These managers are potentially buying the security after a 25% correction due to lower earnings guidance. SRS ($191MM) reduced its position.


Overall, we have many trends to follow in the coming quarters. Event-driven names are popular and are opportunities for managers to compare their ideas to their peers as disagreement becomes more prevalent. While everyone continues reporting on technology firms’ outperformance, HF ownership hasn’t drastically shifted in Q1—perhaps this will occur in Q2 filings or it may be a lot of hot air without substance. The recent downturn in technology will ensure that managers continue to evaluate the return potential of the sector and those popular FAANG names. Cybersecurity is an increasingly popular theme for managers of capital to follow in 2017 and beyond.

The HFU is accessible to Novus clients for further analysis.

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