How do AlphaClone members use our research platform? As you would expect, there is not just one answer. Different members will have vastly different approaches. Here are some of the most common approaches and how each has performed this year and since our launch in December 2008.
Established stars
Everyone loves a winner. Perhaps the most common approach used by members is to follow established fund managers with high profiles. A few months ago we highlighted the 10 managers that are most tracked by members. Here's how their Top 10 Holdings clone strategy has performed so far this year (as of 10/30 close) and over the past three years.
Most Tracked/Top 10 Holdings Clone
| Total Return |
YTD |
3Y |
| Baupost |
8.60% |
199.40% |
| Appaloosa |
-23.50% |
122.40% |
| Berkshire |
10.60% |
39.20% |
| Greenlight |
-0.60% |
52.90% |
| Pershing Square |
-13.80% |
118.40% |
| Klienheinz |
-15.90% |
55.10% |
| Paulson |
-8.80% |
36.50% |
| ValueAct |
7.70% |
211.50% |
| Pabrai Mohnish |
-9.80% |
313.30% |
| ABP Investments |
11.80% |
96.00% |
|
|
|
| S&P500TR |
3.90% |
46.10% |
Rising stars
Finding the “next Seth Klarman”. We can't tell you how many times we've heard that one. Members using this approach believe in their ability to effectively pick emerging talent. We've received many requests to add emerging managers to our universe. Here's the backtested YTD and 2010 Top 10 Holdings clone performance for managers on our platform who have relatively short filing histories (2007 or later):
Emerging Funds/Top 10 Holdings Clone
| Total Return |
YTD |
2010 |
| Balestra Capital |
7.00% |
47.70% |
| Catapult Capital |
-5.70% |
8.50% |
| Dialectic Capital |
-1.80% |
11.90% |
| Hawkshaw Capital |
-4.30% |
14.20% |
| Hayman Advisors |
21.70% |
13.90% |
| Samlyn Capital |
1.80% |
11.40% |
Trafelet Capital
|
-6.20% |
10.90% |
| White Elm Capital |
-1.30% |
8.80% |
|
|
|
| S&P500TR |
3.90% |
15.10% |
Ready to go
Hard to argue with the statement “past performance does not guarantee future results”. That's why it makes sense to do what most institutional investors do, diversify single-manager risk buy investing in a group of managers. This "fund of funds" approach to investing spreads out your exposure to any one manager. We call our "fund of funds" AlphaClone Core Strategies, and investing in one or more of them means we're doing the manager selection for you. Not all core strategies are available to research members but most are. Below we summarize backtested results assuming no hedging is performed (for investment account clients, AlphaClone implements static and dynamic hedging to manage volatility and risk).
Core Strategies (long only)
| Total Return |
YTD |
3Y |
| Activist Masters |
10.30% |
92.30% |
| Tiger Cubs |
3.30% |
71.70% |
| International |
-4.90% |
110.20% |
| Concentrated Funds |
4.70% |
61.20% |
| ETF Ideas |
3.80% |
84.60% |
Value Masters
|
6.10%
|
76.00%
|
| S&P500TR |
3.90% |
46.10% |
Custom built
Members who want to diversify “single -manager risk” but want to select managers themselves use our “Create a Fund Group” feature. The feature can be used to combine and filter a group's holdings by sector and/or market capitalization then backtest performance. Members have created thousands of custom groups since AlphaClone's introduction. Here is a semi-random selection:
Custom Built/Top 1 Holdings Clone*
| Total Return |
YTD |
3Y |
| Jacob's Ladder |
25.30% |
112.40% |
| Value Masters/Small Cap |
4.50% |
44.40% |
| Masters of Universe |
-2.30% |
58.60% |
| Value Group/Basic Material* |
6.00% |
124.90% |
| Short Sub-Prime |
1.00% |
95.20% |
| Value Activist* |
13.60% |
27.90% |
| Idea Track |
9.30% |
79.70% |
| World Beta |
0.60% |
47.40% |
| Alpha Max 30+ |
3.90% |
82.70% |
| Cream of the Crop* |
6.70% |
130.30% |
|
|
|
| S&P500TR |
3.90% |
46.10% |
| * Top 2 Holdings strategy displayed instead of Top 1 Holding to ensure at least 10 current holdings per strategy |
Sector rotation
Sector rotation is perhaps the most common screen used to filter our hedge fund universe. Using our Sector Picks fund groups members can view and backtest different sector specific strategies derived from our universe of hedge funds. Follows a snapshot of the YTD and 3Y performance for the Top 10 Popularity strategy across each sector:
Sector Allocation/Top 10 Popularity Clone
| Total Return |
YTD |
3Y |
3Y Rtrn on S&P500 Sector Index
|
| Sector Picks: Non-Cyclical |
18.50% |
80.80% |
29.50% |
|
Consumer Staples |
| Sector Picks: Utilities |
14.80% |
46.90% |
19.40% |
|
Utilities |
| Sector Picks: Technology |
11.70% |
98.90% |
68.50% |
|
Info Tech |
| Sector Picks: Energy |
11.30% |
75.10% |
44.60% |
|
Energy |
| Sector Picks: Transportation |
-2.10% |
52.00% |
48.10% |
|
Transportation |
| Sector Picks: Basic M... |
-2.70% |
72.20% |
54.70% |
|
Materials |
| Sector Picks: Healthcare |
-4.70% |
9.10% |
28.20% |
|
Healthcare |
| Sector Picks: Financial |
-9.20% |
25.20% |
-6.30% |
|
Financials |
| Sector Picks: Cyclical |
-11.00% |
98.80% |
85.70% |
|
Discretionary |
Cherry picking stocks
Perhaps one of the most powerful uses but also the most elusive is when members combine their own “hunches” with our platform's ability to screen our universe of stocks. One of the more common ways members do this (and I've also done this) is to look at our Hedge Fund Index Top 1 Holdings clone and rank the clone's current portfolio by price at rebalance looking for holdings that are trading sub $5. You'd be surprised what you find.
The examples above are by no means a complete list. No doubt there are dozens of additional ways members utilize AlphaClone. Please share your approach with us and give specific examples of how you benefited. AlphaClone is a tool and just like any tool it takes skill and discipline to use it effectively. Now, with our 50% off annual full membership through 2012 offer, AlphaClone is more accessible than ever (offer expires 11/31/2011).
IMPORTANT DISCLOSURES FOR BACKTEST PERFORMANCE RESULTS
Backtesting is the process of evaluating a core strategy by applying it to historical data. Backtested performance results are provided for purposes of illustrating historical performance had a core strategy had been available during the relevant period. Backtested performance results are hypothetical and have inherent limitations. AlphaClone makes no representation that any core strategy will achieve performance similar to any backtested performance results. Actual results could differ materially from backtested performance and future results could differ materially from backtested performance. Past performance is no indication or guarantee of future results.
Backtested performance results: (i) do not reflect the deduction of any management fees or trading commissions; (ii) are not based on actual trading and do not reflect any market impact of buying and selling securities, trade timing and security liquidity; (iii) are updated on a quarterly basis following the filing of public disclosure reports by certain hedge fund and institutional money managers; (iv) reflect the closing prices on the rebalance date; (v) reflect prices that are fully adjusted for dividends and corporate actions (e.g., stock splits); (vi) do not reflect any public disclosures filed after a rebalance date; (vii) reflect the historical results of securities which have been, been are no longer, publicly traded; and (viii) reflect the historical results of money managers who are no longer filing public disclosure reports.
AlphaClone does not represent that backtested performance information is accurate, complete or current, and AlphaClone has no liability with respect thereto. The AlphaClone core strategies are subject to change without notice and AlphaClone has no obligation to update you as to any such changes. The information provided herein comes from what AlphaClone believes to be reliable sources. AlphaClone, however, makes no representations as to its reliability or accuracy, and you should undertake independent analysis to ensure the accuracy of the information.
