A question we’re often asked about AlphaClone is whether we track hedge fund foreign stock holdings. The answer is no, and yes. A couple of weeks ago we highlighted how you can replicate foreign market ETF investments amongst top university endowments. We saw current quarter investments by endowments in ETFs that cover emerging markets (EEM), China (FXI) and Brazil (EWZ) amongst others. All pretty good bets because those foreign market ETFs are up 28%, 23% and 47% respectively year to date (the S&P 500 is up 1% year to date).
This week, in our third and final article in the series we’re calling “A Clone for Every Investor”, we’re going to highlight another way you can replicate top investor foreign company investments – by tracking their holdings in American Depositor Receipts or ADRs. ADRs are the securities of foreign companies but which trade on US stock markets and there are perhaps hundreds of them broadly representing the world’s developed, developing and emerging markets.
To make it super simple for AlphaClone users to clone ADR investment behavior we created the AlphaClone International fund group – which was constructed to include all hedge funds in our database but screened for just their ADR holdings. So for example, the group’s Top 10 Popularity strategy invests in the ten most popular ADR holdings each quarter at the time they are disclosed to the public. As usual, all strategies are instantly backtested to the year 2000.
OK, that’s enough introduction - how do clones based on this fund group perform? The table below summarizes the group’s Top 10 Popularity clone over the 3, 5, and 10 year time periods. The results are compared against the S&P 500 Depository Receipts index.
Internatonal
Fund Group - Top 10 Popularity Performance Statistics (as of
2009-05-18) 3 YEAR 5 YEAR INCEPTION Clone Index Clone Index Clone Index Total Return 4.1% -27.8% 127.6% -16.8% 35.4% -37.4% Annualized Return 1.4% -10.3% 17.9% -3.6% 3.3% -4.9% Annualized Volatility 39.3% 19.6% 32.5% 16.4% 33.1% 16.2% Sharpe Ratio -0.1 -0.7 0.4 -0.5 0 -0.6 Max Drawdown -63.7% -48.8% -63.7% 48.8% -64.0% -52.3%
The first thing that jumps out at you is how much better the clone performs versus its benchmark index. The clone’s annualized five year returns outperformed the index by over 21 percentage points! The clone’s volatility is double that of the index by it still trounces the index on a risk adjusted basis judging by its 0.4 sharpe ratio as compared to the index’s -0.5. Finally, this clone is up 25.4% so far this year versus the benchmark which is only up 1.1% year to date. That’s impressive performance by any measure and certainly worth considering as part of any investor’s international portfolio allocation.
Here what the clone holds currently – at least until this Friday, May 22 when AlphaClone will rebalance all its clone portfolios based on 3/31/2009 period filings. Stay tuned.
|
Current Portfolio as of 2009-05-19 |
PRICE |
||
|
NAME |
TICKER |
5/18/09 | 2/20/09* |
|
AMERICA MOVIL SAB DE CV |
AMX |
$37.84 |
$28.00 |
|
BAIDU INC |
BIDU |
$243.59 |
$133.00 |
|
TEVA PHARMACEUTICAL INDS LTD |
TEVA |
$44.83 |
$46.00 |
|
LONGTOP FINANCIAL TECHNOLOGIES |
LFT |
$23.18 |
$15.00 |
|
RYANAIR HLDGS PLC |
RYAAY |
$28.35 |
$26.00 |
|
LDK SOLAR CO LTD |
LDK |
$ 8.20 |
$ 7.00 |
|
PETROLEO BRASILEIRO SA PETROBR |
PBR |
$39.40 |
$27.00 |
|
NEW ORIENTAL ED & TECH GRP INC |
EDU |
$53.42 |
$41.00 |
|
GOLD FIELDS LTD NEW |
GFI |
$12.11 |
$11.00 |
|
CHUNGHWA TELECOM CO LTD |
CHT |
$18.24 |
$15.00 |
* Prior rebalance date
