Investors who typically take cues from leading investment managers might want to think twice, according to a recent Barron’s article that notes, “with the extreme market volatility of the last two months,” such a strategy might be “of little use.”
The article explains that investment managers overseeing more than $100 million are required to report their long holdings with the SEC (in Form 13F) within 45 days after the quarter’s end and that traders look to those filings for insights–but since the first quarter ended only a week after the March 23 market low, “funds were feverishly trying to navigate the uncertainty.”
Even without the added volatility, however, the article points out the limited usefulness of the 13F statements:
- The information is already six weeks old when released.
- Funds are only required to report their long positions, so what might “appear as a bullish stance on a company may actually be a hedge against a position that doesn’t have to be disclosed.”
- The type of fund is important: “The 13F of a global macro fund may be of little use, for example, because the long equity portion of the fund may be only a tiny portion of its total holdings.” Similarly, the end-of-quarter reporting of a quant fund could only show a snapshot given how quickly they can change positions.