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Hedge Funds, Security Analysis

State of the Industry: August 2017

Matt Giordano Senior Associate, Client Analytics

In the latest iteration of Novus State of the Industry, we examine factor movements of August 2017, including best performing stocks & funds

For the interactive version of this report, please head to our Novus State of the Industry report.

In August, the Novus Hedge Fund Universe (HFU) and the broader US Market were both generally flat, with a 0.24% return for the HFU and 0.30% for the S&P 500. This brings HFU alpha YTD down to a negligible 15 basis points (12.05% – 11.90%). Telecom, Discretionary, and Materials led outperformance, while the hedge fund industry staple sectors of IT and Healthcare were laggards.

Growth continues to be the only portfolio tilt tracking close to the market and HFU, with the Russell 1k Growth returning 10.6% on the year. This doesn’t extend to small caps in general, however, with the Russell 2k down -0.5% on the month and only 4.3% YTD; nor to a value tilt, with the Russell 1k Value now negative YTD.

The Conviction and Consensus factor indices continued to outperform the market and the HFU significantly, returning 30.4% YTD and 20.7% YTD respectively. Crowdedness was down a point on the month to 13.1% YTD, while Concentration continues to be a significant laggard at 2.2% YTD.

Conviction Consensus Trends

Stepping over to managers now, this month’s simulated performance leaderboard was dominated by healthcare focused managers, Birch Run being the only exception. Casdin (a name we have seen here recently) currently sits atop the leaderboard with 16.1% YTD. Once again, the Top 5 fully turned over from last month. Amongst the top performing alpha names in the Hedge Fund Universe, CHTR remains, while the remaining four names also turned over.

Top Managers August 2017

Checking in on the R3K metrics: Correlation stays at 9% with Dispersion taking a turn higher to 15%. Low correlations and higher dispersions are broadly positive signs for the stock pickers of the world. Let’s see if that translates over the next month.

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