The Hedge Funds Weblog

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It is wise for investors to pay attention to what leading hedge funds investment managers are buying and selling. Every quarter, fund managers overseeing more than $100 million must disclose their quarter-end holdings publicly by filing SEC Form 13-F, listing all US-traded securities the manager held at the end of the quarter. The form doesn't disclose short positions or intraquarter trades, but it can still be a valuable source of information on long stock bets.

In their Q4 2010 update, Fairholme Capital Management added to seven of their largest positions, reduced two large positions, and initiated one new position in General Growth Properties. They increased their positions in AIG and Bank of America by over 30% each, along with a 30% increase in CIT Group. The largest increase in position was in Regions Financial, where they upped their stake by 73.5%. The two top holdings that were reduced were Citigroup and Goldman Sachs, although these reductions were a minor 2% each.

© JMRosenfeld

Looking at which stocks are held by top hedge fund managers can be a useful source of investment ideas for individual investors. However, publicly released hedge fund investment data is dated and limited, so it can be misleading as well. As with most stock market information, it is noisy and sloppy but there is still insight to be gained because the hedge fund industry is an influential part of the market.

Goldman Sach's compiles a quarterly hedge fund 'Very Important Position' (VIP) list of the top hedge fund holdings. The top five stocks that were popular with hedge funds at the end of 2010 based on this list were Apple, Citigroup, Microsoft, JP Morgan Chase, and Google. Individual investors can track hedge fund holdings through Securities and Exchange commission filings known as 13-Fs. Major hedge funds have to disclose their US equit holdings on this form 45 days after the end of each quarter.

© epSos.de

State-owned sovereign wealth funds (SWF) are seeking large-scale institutional investment, and new countries are looking at hedge fund investments as a viable option for their capital. The total of all sovereign wealth funds represents an estimated $4 trillion in assets under management, and it is predicted to jump to $7 trillion by the end of this decade. The largest of these SWFs is the Abu Dhabi Investment Authority (Adia), which weighs in at an estimated $625 billion.

This fund and others in the Middle East, especially, have been long time allocators of capital to the hedge fund space. But over the past couple of years, a growing number of other SWFs have announced plans to make their first-ever allocations to the space. This includes investments from the Irish National Pensions Reserve Fund, the Korea Investment Corporation and the Hong Kong monetary Authority. There are now 23 sovereign wealth funds that are either currently investing in hedge funds or planning to do so in the near future.