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Shraman Ghosh, Aishwarya Damodharan, and Nathan Innis discuss the construction philosophy of the Novus 4Cs, and how the Novus Conviction Index has fared in the times of COVID-19.

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Best Ideas

A best ideas strategy involves the creation of an index or basket of stocks owned by hedge funds. The logic is that by observing what hedge funds are holding in aggregate, one could isolate themes that produce outsized returns.

However, depending on how you choose to approach the dataset, outcomes vary drastically. To create an effective best ideas strategy, special care must be given to: (1) data integrity, (2) filer identity, and (3) construction mechanism.

Further Reading:

Special Notice:

On July 10, 2020, the Securities and Exchange Commission proposed to significantly raise the AUM threshold for funds required to file quarterly 13F disclosures. The new AUM threshold would become $3.5 billion, effectively excluding 90% of current filers.

Aside from shrinking the dataset with which the Conviction Index is maintained, we anticipate this change would have negative consequences for the investment community and markets. Read our analysis of the proposal.

Please consider adding your voice during the 60-day public feedback period by emailing the SEC at rule-comments@sec.gov subject line File Number S7-08-20; or by submitting a comment on the SEC’s website.

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Andrea Gentilini

Accomplished investors share their stories, mental models, and what market factors they’re paying attention to today. Host Andrea Gentilini of Novus unpacks what has helped them and hindered them on their diverse roads to success.

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