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by Maz Jadallah

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As of September 30, 2019

We look at the AlphaClone Hedge Fund Master Index (ALFMIX or “AlphaClone Index”) and compare it against several peer 13F index strategies as well as the overall market. Our analysis period is as of the first full month the index’s calculation agent (Solactive) began calculating the index, December 1, 2017, through September 30, 2019.

The AlphaClone Index seeks to identify and access investment managers with high alpha potential by analyzing their regulatory holdings disclosures (Form 13F-HR). Other indexes use the same 13F dataset but construct their indexes very differently and, as you will see below, generate very different results.

For example, the Goldman Sachs Hedge Industry VIP index seeks to access the 50 holdings that are most popular amongst hedge fund managers’ largest disclosed positions. As such, it yields a very different portfolio with only a 25% overlap by weight with AlphaClone’s index (see graphs below).

As always, before considering an index, please make sure to review each index’s methodology document to understand how it is constructed.

Performance

ALFMIX consistently outperforms its peers as well as the overall market and large growth stocks over the YTD, 1 Year and 18 month periods.

Sector Allocation

AlphaClone’s Index performance is particularly of note in that its portfolio is more defensive than the Russell 1000 Growth Index with slightly lower allocations to technology and cyclical stocks and significantly higher allocations to defensive and financial stocks. (Source: Morningstar)

Holdings Overlap (by Weight)

Finally, AlphaClone’s index performance has been driven by unique names. This is evident when looking at the degree of overlap between the index and its peers as well as with the overall market/category. (Source: ETF Research Center)

AlphaClone Index | Top 5 Realized Gains (Dec 2017 to September 2019)

While security selection within the healthcare sector has dominated the top five gains, overall and over the analysis period, the index has had a 56% win rate with 48 of 85 deletions registering gains. The Services sector, which includes consumer cyclicals, communication services and industrials, saw the most winners with 15 of 48, while the Technology sector saw the next highest win rate with 10 of 48. Healthcare came in third place with 8 winners.

+247.74%
+88.77%

+83.73%
+64.37%

+63.58%

© 2019, All Rights Reserved. The AlphaClone logo is a service mark of AlphaClone, Inc. The information contained herein (the “information”) may not be reproduced or re-disseminated in whole or in part without the prior written permission from AlphaClone, Inc. AlphaClone, Inc. is a registered investment advisor with the SEC. Registration of an investment advisor does not imply any level of skill or training. AlphaClone’s investment products seek capital appreciation as their investment objective. There can be no assurance that the investment objective will be achieved. Past performance is not indicative of future results. Consider the investment objectives, risks, charges, expenses and instruments used to implement a strategy before investing. This communication does not constitute an offer or a solicitation to invest with AlphaClone, Inc.

The AlphaClone Hedge Fund Masters Index (ALFMIX) is an index of high conviction equity holdings derived from hedge fund public disclosures and selected by AlphaClone. ALFMIX was launched on August 25, 2017 and is calculated by Solactive. The Solactive Guru Index (GURU Index) tracks the price movements of the top equity holdings of a select group of hedge funds based on the quarterly regulatory filings reported to the SEC. The Index is calculated as a total return index in USD and weighted equally. The Goldman Sachs Hedge Fund VIP Index (GVIP Index) consists of hedge fund managers’ “Very-Important-Positions,” or the US-listed stocks whose performance is expected to influence the long portfolios of hedge funds. Those stocks are defined as the positions that appear most frequently among the top 10 long equity holdings within the portfolios of fundamentally-driven hedge fund managers. The Index is rebalanced on a quarterly basis to reflect changes in reported hedge fund manager holdings. The Russell 1000 Growth Index is an index composed of large- and mid-capitalization U.S. equities that exhibit growth characteristics. The S&P 500 Index is an index of large capitalization US equities. It is not possible to invest in an index.

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