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Hedge Fund Trends, Quarterly Updates

State of the Industry: March 2017

Matt Giordano Senior Analytics Associate

In the latest iteration of the Novus State of the Industry, we touch on the best performing stocks & funds among other factor movements.

For an interactive version of this article, please view it here.

After a strong start to the year, March was an up and down month in the markets. With the markets in the US generally flat, even the modest returns posted by the Novus Hedge Fund Universe (up 0.55% in March) were enough to pull the industry ahead of the S&P 500, although just so (year to date, 6.40% against 6.07% respectively). This is notable however, as the last time we saw the industry outperform its most widely used benchmark (cumulative YTD) was back in 2015.

BM1 = SP500

BM2 = MSCI World

state of the industry march

There was a shakeup in the top alpha generating names in March, with 80% turnover month over month and only AAPL remaining in the top 5. FB now leads the way, followed by CMCSA.

Similar to our alpha names, the top Hedge Fund performers had an 80% turnover, with only Casdin Capital remaining in the Top 5. ESL Investments, with its concentrated portfolio, rode the back of SHLD’s massive – and quite thought-provoking – outperformance (combined with a 35% position in the name) to the top of the YTD performance charts. While last month 4 of the 5 top performing managers reported market values of less than $1 billion, that is now true for all 5 managers.  For more on what other traits the top stock picking funds have in common, check out our recent piece on the topic here.

Looking at the Novus factor indices, Conviction continues to outperform the other factors and the market, mostly due to its performance earlier in Q1 and holding the alpha names FB and AAPL. Concentration on the other hand suffered some heavy losses in March (down 3.65%) dragged down by its holdings of FOMX and HTZ.

state of the industry march

Sector-wise, telco continues to drive the HFU’s outperformance (YTD alpha of 2.88%), with both Real Estate and Financials also contributing significant alpha. IT and Healthcare, two Hedge Fund Industry favorite sectors, are the only sectors in the HFU to lag the S&P 500 YTD.

state of the industry march

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