Using 13F information allows you to leverage the collective wisdom of the hedge fund community for your own portfolio.  By running our AlphaStratus software on every filer, we are able to identify only those filers which consistently provide the most profitable information (via their 13F filings) for constructing a portfolio…

While some of the best filers for this purpose are well-known hedge funds, many are not.  Simply replicating the biggest positions of the most famous hedge fund manager is a sure way to lose money quickly.  Many “famous” hedge funds are actually horrible candidates for portfolio replication for a number of reasons.  We find only those filers that meet our specific criteria for replication, including:

- Well known track record of long-term success

- Equity focused: Since 13Fs only convey information about equity holdings, trying to replicate the 13F positions of a hedge fund focused in the distressed debt space isn’t going to help

- Low turnover:  Even if a hedge fund is entirely focused on equities but turns over the portfolio too often, then information from 13Fs is unlikely to convey meaningful information going forward (think James Simon’s Renaissance Capital)

The AlphaStratus Select Index consists of 50 equal-weight positions from a handfull of top, equity-focused, hedge funds that hold their top positions for several quarters at a time.  Positions are re-balanced quarterly (1 week after the 13F deadline) and held for 1 quarter:

By leveraging the research capabilities of the best hedge fund managers, one can reduce the equity universe down to a focused group of 50 companies that offer the highest quality equity exposure over time.

Focusing on those filers that demonstrate not only superior stock-picking ability (the most important requisite) but also lower turnover and higher concentration means the AlphaStratus Select Index captures the best trades from the best hedge funds:

This stock was held for two quarters in 2009 and was entered into again this year:

This is another relatively new addition to the Index:

…as well as this stock:

some past trade signals from replicating our list of filers in quarters past:

 

For more information about subscribing to the AlphaStratus Select Portolfio, or for creating bespoke hedge fund replication portfolios, contact us at:  info@alphastratus.com