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Novus Monthly Industry Report

State of the Industry: November 2018

Alex Chadwick Associate, Client Analytics

Markets experienced a minor recovery during November, partially making up for a rocky October.

Markets experienced a minor recovery during November, partially making up for a rocky October. The Novus Hedge Fund Universe (HFU) returned 1.13%, underperforming the S&P 500’s 2.04% over the month. The S&P 500 continues to outperform comparable equity indexes on a MTD, QTD, and YTD basis.

Joho Capital LLC had the highest implied returns for November, at 10.88%. More than half of their contribution for the month can be attributed to consumer discretionary names, where they generated over 450 bps of alpha. Floor and Decor Holdings (FND) was their largest contributor, alongside Alibaba (also held by Tiger Pacific and Jet Capital).

This month hedge funds underperformed the broader market in all sectors except IT, where they were only down -.85% compared to the index at -1.57%. Microsoft, an IT name with 253 hedge fund owners, was the highest alpha stock in the HFU this month. Meanwhile, Communication Services still has the highest YTD hedge fund alpha despite underperformance in November. The most extreme underperformance was Utilities, where hedge funds were up .47% compared to the S&P’s 3.89%.

As far as the Novus 4C Indicies are concerned, Conviction had the highest performance for the month, outpacing the S&P 500 by over a percent. Crowdedness continues to underperform, as the only index with negative returns both this month and YTD.

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