Asset Allocation & Fund Positioning, Copley Fund Research

Steven Holden

Asset Allocation & Fund Positioning

Copley Fund Research

Copley Fund Research provide research and data on asset allocation among Global and Emerging Market equity funds.  The analysis details absolute and relative positioning across countries, sectors and industries together with highly granular data on single stock and single fund allocations.  The data is updated monthly with time series going back to January 2011.

Global Research - Analysis of 165 prominent Global equity funds, combined AUM $335bn
GEM Research - Analysis of 127 prominent global EM equity funds, combined AUM $250bn

Asset Allocation - Global and GEM Equity

Equity Bottom-Up

<ul>
<li>The percentage of US active funds invested in Tesla has risen sharply over the course of the year.  A total of 18%, or 88 out of the 496 funds in our US analysis hold a position in Telsa.  Average fund weights across all funds is 0.42%, across Telsa holders is 2.34%.  </li>
<li>Total dollar holdings are at peak levels among the funds in our analysis, with combined AUM in <a href="https://www.smartkarma.com/entities/tesla-motors-inc" target="_blank" data-smartkarma-citation="entities:20279:1" rel="noopener">Tesla Motors (TSLA US)</a> of $37.6bn among the 88 holders.  </li>
<li>Current holders have tended to sell in to strength this year, with $4.4bn in outflows as managers keep Telsa from dominating portfolios if left unchecked.</li>
<li>At current levels, <a href="https://www.smartkarma.com/entities/tesla-motors-inc" target="_blank" data-smartkarma-citation="entities:20279:1" rel="noopener">Tesla Motors (TSLA US)</a> will join the ranks as one of the top underweight holdings among active US managers, currently led by <a href="https://www.smartkarma.com/entities/apple-inc" target="_blank" data-smartkarma-citation="entities:666:1" rel="noopener">Apple Inc (AAPL US)</a> and <a href="https://www.smartkarma.com/entities/microsoft-corp" target="_blank" data-smartkarma-citation="entities:15273:1" rel="noopener">Microsoft Corp (MSFT US)</a> .  If no further buying occurs, Tesla will likely slot in to 4th place behind <a href="https://www.smartkarma.com/entities/amazon-com-inc" target="_blank" data-smartkarma-citation="entities:409:1" rel="noopener">Amazon.com Inc (AMZN US</a> (assuming an inclusion weight of ~1.5%).</li>
<li>We expect buying pressure from benchmark aligned funds who are currently not invested in the stock.  Estimates of $5.8bn when analysing previous index inclusions <a href="https://www.smartkarma.com/entities/facebook-inc-a" target="_blank" data-smartkarma-citation="entities:665:1" rel="noopener">Facebook Inc A (FB US)</a> and <a href="https://www.smartkarma.com/entities/berkshire-hathaway-inc-cl-b" target="_blank" data-smartkarma-citation="entities:8635:1" rel="noopener">Berkshire Hathaway Inc Cl B (BRK/B US)</a> .</li>
<li>Potential $37bn of selling from active US funds, though current holders are long-term holders and not guaranteed to sell in to the rebalance.  We see an imbalance of buying from passive funds who may need to push prices significantly higher to entice these long-term holders to sell.</li>
</ul>Analysis taken from our US research, covering 496 active US equity funds with a combined AUM of $3.4tr.


The percentage of US active funds invested in Tesla has risen sharply over the course of the year.  A total of 18%, or 88 out of the 496 funds in our US analysis hold a position in Telsa.  Average fund weights across all funds is 0.42%, across Telsa holders is 2.34%.  
Total dollar holdings are at peak levels among the funds in our analysis, with combined AUM in Tesla Motors (TSLA US) of $37.6bn among the 88 holders.  
Current holders have tended to sell in to strength this year, with $4.4bn in outflows as managers keep Telsa from dominating portfolios if left unchecked.
At current levels, Tesla Motors (TSLA US) will join the ranks as one of the top underweight holdings among active US managers, currently led by Apple Inc (AAPL US) and Microsoft Corp (MSFT US) .  If no further buying occurs, Tesla will likely slot in to 4th place behind Amazon.com Inc (AMZN US (assuming an inclusion weight of ~1.5%).
We expect buying pressure from benchmark aligned funds who are currently not invested in the stock.  Estimates of $5.8bn when analysing previous index inclusions Facebook Inc A (FB US) and Berkshire Hathaway Inc Cl B (BRK/B US) .
Potential $37bn of selling from active US funds, though current holders are long-term holders and not guaranteed to sell in to the rebalance.  We see an imbalance of buying from passive funds who may need to push prices significantly higher to entice these long-term holders to sell.
Analysis taken from our US research, covering 496 active US equity funds with a combined AUM of $3.4tr.

Tesla Inclusion.  What Will Active US Funds Do?

Managing Director

Elan Gore

TMI Data Science

TMI Data Science utilizes Natural Language Processing to build custom leading indicators using unstructured data sourced from the global financial, trade & traditional media.  Our proprietary software, TMI Machine, is a text-mining platform designed with the buy-side & capital markets professional in mind, text-mining the global media to discern and quantify nuanced qualitative shifts in press coverage as they apply to macroeconomics, equity indexes/ETFs, commodities, currencies, fixed income & individual equities.  TMI provides custom leading indicators and systematic trading strategies, operating at the nexus of linguistics & statistics drawing on vast experience in investment banking and hedge fund settings in senior quantitative and fundamental roles.  

TMI Data Science was founded by Elan Gore, an award-winning Senior Global Basic Materials Equity Analyst & China Economist with 15 years of experience in North American hedge funds & institutional managers; and Alessandro Porrino, Ph.D., an Algorithmic Trading Analyst and Programmer with 10 years of front-office experience ranging from complex FX option pricing to auto-hedging strategies at Bank of America Merrill Lynch and Standard Chartered.  Mr. Gore holds an MBA in Finance from New York University Stern School of Business, and Mr. Porrino holds a Ph.D. in Systems Engineering from Brunel University London.

Cross Asset Strategy

<ul>
<li>Data from ~30 million participants in the Chase credit card panel (US) has shown a pullback in spending in recent weeks</li>
<li>The pullback appears to be independent of mobility dynamics, as in-person shopping outperformed overall spending</li>
<li>We text-mine the media for first-person accounts of hardship to find an increase in reported layoffs &amp; reduced personal spending, but the magnitude of increase has been encouragingly small (&lt;1x STDEV) so far relative to readings seen in H1</li>
<li>As we highlighted in <a href="https://www.smartkarma.com/insights/tmi-snapshots-quantifying-relative-sector-sentiment-in-the-recent-rotation-via-text-mining" target="_blank" data-smartkarma-citation="insights:45278" rel="noopener">TMI Snapshots: Quantifying Relative Sector Sentiment in the Recent Rotation Via Text Mining</a>, the cyclical rotation is alive and well on mid-term vaccine-driven recovery expectations; but the potential for vol around year-end funding or seasonal dynamics may be amplified by these weak Q4 trends once they appear in official macro releases</li>
</ul>


Data from ~30 million participants in the Chase credit card panel (US) has shown a pullback in spending in recent weeks
The pullback appears to be independent of mobility dynamics, as in-person shopping outperformed overall spending
We text-mine the media for first-person accounts of hardship to find an increase in reported layoffs &amp; reduced personal spending, but the magnitude of increase has been encouragingly small (&lt;1x STDEV) so far relative to readings seen in H1
As we highlighted in TMI Snapshots: Quantifying Relative Sector Sentiment in the Recent Rotation Via Text Mining, the cyclical rotation is alive and well on mid-term vaccine-driven recovery expectations; but the potential for vol around year-end funding or seasonal dynamics may be amplified by these weak Q4 trends once they appear in official macro releases


TMI Snapshot: High-Freq US Spending Data Pullback Looks Independent of Mobility, But Is It Relevant?

<ul>
<li>US underweight rises to highest ever level among Global investors</li>
<li>Tech and Consumer Discretionary outperformance drives underweights higher</li>
<li>Increasing underweight driven by passive inflows as large cap stocks dominate indices.</li>
<li>Active funds running larger underweight positions among top index constituents.</li>
<li>Active buying to close underweight holdings fuels the fire of the large-cap rally further still.</li>
</ul>Analysis taken from our global active manager research, covering 391 global funds with a combined AUM of $750bn


US underweight rises to highest ever level among Global investors
Tech and Consumer Discretionary outperformance drives underweights higher
Increasing underweight driven by passive inflows as large cap stocks dominate indices.
Active funds running larger underweight positions among top index constituents.
Active buying to close underweight holdings fuels the fire of the large-cap rally further still.
Analysis taken from our global active manager research, covering 391 global funds with a combined AUM of $750bn

The Anatomy of the US Underweight (And the Effect of Rising Passive ETF Flows in the US).

Silver Point

Thomas J. Monaco

Independent Insight Provider

Silver Point is a boutique research firm that focuses on the broader financial services sector, with a particular focus on troubled institutions globally. 

Asia Ex Japan

*Don’t Be Fooled: Citigroup (C.US) [Citi] reported 3Q20 earnings of USD 3.2 bn (EPS of USD 1.40) – increasing USD 1.9 bn (145.4%) on a linked quarter basis and coming in well head of consensus of USD 0.89 per share. Core operating results were even more impressive at Citi, improving USD 2.3 bn or 3.6x linked quarter. Citi cut its loss provisioning effort by USD 5.6 bn (71.4%) during the period despite net new NPLs remaining on an aggressive upswing;*Getting Squeezed From Every Angle: Citi’s operating revenues declined driven by both the decline in principal transactions revenue of USD 1.6 bn (39.7%) and NIM pressures. Expenses were problematic for Citi as well, increasing USD 589 mn (5.7%) over the same period and pushed its C&amp;I ratio higher by 10.1% to 64.4%; and  *Consent Order: On October 7, 2020, Citi announced a Consent Order with the Federal Reserve Bank of New York  and the Office of the Comptroller to take action to improve its risk management, data governance, and internal controls. There was also a USD 400 mn penalty.

*Don’t Be Fooled: Citigroup (C.US) [Citi] reported 3Q20 earnings of USD 3.2 bn (EPS of USD 1.40) – increasing USD 1.9 bn (145.4%) on a linked quarter basis and coming in well head of consensus of USD 0.89 per share. Core operating results were even more impressive at Citi, improving USD 2.3 bn or 3.6x linked quarter. Citi cut its loss provisioning effort by USD 5.6 bn (71.4%) during the period despite net new NPLs remaining on an aggressive upswing;*Getting Squeezed From Every Angle: Citi’s operating revenues declined driven by both the decline in principal transactions revenue of USD 1.6 bn (39.7%) and NIM pressures. Expenses were problematic for Citi as well, increasing USD 589 mn (5.7%) over the same period and pushed its C&amp;I ratio higher by 10.1% to 64.4%; and  *Consent Order: On October 7, 2020, Citi announced a Consent Order with the Federal Reserve Bank of New York  and the Office of the Comptroller to take action to improve its risk management, data governance, and internal controls. There was also a USD 400 mn penalty.

<ul>
<li>Text-mining the global media, we find that improving relative and absolute sentiment on Nancy Pelosi has been leading markets given the importance of stimulus bill passage to the macro outlook</li>
<li>The "Peaceful Transition" or "Peaceful Transfer of Power" theme has been trending in the media, but to our surprise appears to be positively correlated with SPX, suggesting this risk is manifesting strictly in options markets for now</li>
<li>China cybersecurity threats, previously a strong driver of SPY/FXI relative performance, appear to have recently decoupled from equities in a manner which appears less friendly to Chinese equities, as the frequency of flare-ups is perceived to be structurally elevated</li>
</ul><div class="content-highlight">TMI Data Science utilizes Natural Language Processing to build custom leading indicators using unstructured data sourced from the global financial, trade &amp; traditional media. Our proprietary software text-mines the global media to discern and quantify nuanced qualitative shifts in press coverage as they apply to macroeconomics, equity indexes/ETFs, commodities, currencies, fixed income &amp; individual equities. </div>


Text-mining the global media, we find that improving relative and absolute sentiment on Nancy Pelosi has been leading markets given the importance of stimulus bill passage to the macro outlook
The "Peaceful Transition" or "Peaceful Transfer of Power" theme has been trending in the media, but to our surprise appears to be positively correlated with SPX, suggesting this risk is manifesting strictly in options markets for now
China cybersecurity threats, previously a strong driver of SPY/FXI relative performance, appear to have recently decoupled from equities in a manner which appears less friendly to Chinese equities, as the frequency of flare-ups is perceived to be structurally elevated
TMI Data Science utilizes Natural Language Processing to build custom leading indicators using unstructured data sourced from the global financial, trade &amp; traditional media. Our proprietary software text-mines the global media to discern and quantify nuanced qualitative shifts in press coverage as they apply to macroeconomics, equity indexes/ETFs, commodities, currencies, fixed income &amp; individual equities. 

TMI Thematics: Nancy Pelosi Sentiment Moving Markets, Climbing "Peaceful Transition" Wall of Worry

United States

SPDR S&P 500 ETF Trust is an exchange-traded fund incorporated in the USA. The ETF tracks the S&P 500 Index. The Trust consists of a portfolio representing all 500 stocks in the S&P 500 Index. It holds predominantly large-cap U.S. stocks. This ETF is structured as a Unit Investment Trust and pays dividends on a quarterly basis. The holdings are weighted by market capitalization.

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SPDR S&P 500 (SPY US)

Tesla Inclusion. What Will Active US Funds Do?

What are the current levels of ownership in Tesla Motors? We analyse 496 US active funds with a combined AUM of $3.4tr to find out.

Steven Holden

TMI Snapshot: High-Freq US Spending Data Pullback Looks Independent of Mobility, But Is It Relevant?

Chase US card spending data has pulled back in recent weeks, and our own text-mined data has seen a mild increase in reported financial hardship. ...

Elan Gore

The Anatomy of the US Underweight (And the Effect of Rising Passive ETF Flows in the US).

ETF inflows drive underweights in US equities to record levels. Active buying to close underweights in major index stocks fuels the rally further...

Steven Holden

Citigroup – Watch The Negative Jaws

CITIGROUP: Investors Shouldn't Be Fooled By The EPS Beat Led By A Massive Pre-emptive Provision Cut. Bank Has Negative Operating Jaws, Worsening...

Thomas J. Monaco

TMI Thematics: Nancy Pelosi Sentiment Moving Markets, Climbing "Peaceful Transition" Wall of Worry

Text-mining the global media, we find

Elan Gore

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