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Hedge Fund Overlap, Hedge Funds

Novus Strategies Featured in Barclays Research

Faryan Amir-Ghassemi Director of Analytics

“What Lies Beneath” is a publication by Barclays on hedge fund industry trends, and it features some of our very own findings.

The Barclays Prime Services Capital Solutions group recently published their Hedge Fund Pulse publication titled “What Lies Beneath”– a comprehensive look at hedge fund industry trends and outlook for 2015.  Featured prominently in this paper was Novus analysis, much of which was based on our Hedge Fund Universe (“HFU”).  The paper mentions several aggregate data strategies which we’ve blogged about before, including Conviction and Consensus.

1.Novus data, 2008 to October 2014; Novus’s Hedge Fund Universe (HFU) contains 11,000+ securities and 100,000+ positions across 800+ HF managers. Novus has constructed custom, non-investable strategy indices and tracked their performance against the S&P 1500. Four key indices Novus have constructed include Consensus Index, Conviction Index, Size Index and Concentration Index. 2. Consensus index – list of 20 stocks with the highest participation among all the managers in the Novus’ HFU, i.e., most frequently bought names 3. Conviction Index – list of 20 stocks with the highest number of managers in the Novus’ HFU invested with conviction (If a stock accounts for more than 5% of a manager’s portfolio, the stock is considered an investment with conviction).

1. Novus data, 2008 to October 2014; Novus’s Hedge Fund Universe (HFU) contains 11,000+ securities and 100,000+ positions across 800+ HF managers. Novus has constructed custom, non-investable strategy indices and tracked their performance against the S&P 1500. Four key indices Novus have constructed include Consensus Index, Conviction Index, Size Index and Concentration Index.
2. Consensus index – list of 20 stocks with the highest participation among all the managers in the Novus’ HFU, i.e., most frequently bought names.
3. Conviction Index – list of 20 stocks with the highest number of managers in the Novus’ HFU invested with conviction (If a stock accounts for more than 5% of a manager’s portfolio, the stock is considered an investment with conviction).

 

Within the HFU, the Barclays paper also highlights overlap, a concept we focus on closely at Novus as it relates to crowding as an exogenous risk factor:

1.Novus data, Strategic Consulting analysis 2. Most frequently traded names by HF managers
1. Novus data, Strategic Consulting analysis
2. Most frequently traded names by HF managers

 

Crowding, of course, dovetails with a potential decline in liquidity, and the chart below highlights that connection:

1.Percentage of total equity holdings Equity HFs can liquidate in 30 consecutive trading days, provided they present no more than 20% of the trailing 90-day ADV of each security. Source: Novus

1. Percentage of total equity holdings Equity HFs can liquidate in 30 consecutive trading days, provided they present no more than 20% of the trailing 90-day ADV of each security. Source: Novus

 

For access to the full Barclays report: What Lies Beneath – 2015 Global Hedge Fund Industry Trends and Allocation Outlook

For more information on the Barclays Capital Solutions team, reach out to Jennifer Bai.  For information on the HFU strategies, please reach out to Stan Altshuller or yours truly.

To contact the author of this story:
@FaryanAM

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