Asset Allocation & Fund Positioning, Copley Fund Research

Steven Holden

Steven Holden is the CEO and Founder of Copley Fund Research, an independent provider of research on equity fund positioning and performance.  Set up in 2014, Copley focuses on global, global emerging market, US, Asia Ex-Japan and China active equity funds, covering over $4tr in assets across 1300 active managers.  The company provides data and analysis on market trends, manager exposures and active fund performance to an audience of investment managers, pension funds and fund selectors worldwide.  Mr Holden’s 14-year investment banking career started in 2000, where he worked for Morgan Stanley as an equity derivative trader focused on emerging markets in London.  Following this, he spent 4 years at Citibank in London and Hong Kong as an Executive Director in derivative sales, focused again on emerging markets.

Asset Allocation & Fund Positioning

EM Managers: Most Avoided Stocks - 2018 Update

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

Cross Asset Strategy

Multiple Countries / Cross Asset Strategy

<ul><li>Many stocks in the benchmark MSCI Emerging Markets index are largely avoided by active investors.  To screen for unloved stocks, we filter our aggregated stock holdings data as follows:</li></ul><ol>
<li>Average Active Fund Weight &lt; I-Shares MSCI Emerging Markets ETF Weight (i.e net underweight)</li>
<li>Percentage of Funds Held &lt; 3% (i.e less than 3% of funds hold each stock).</li>
</ol><ul>
<li>The list is headed by <a href="https://www.smartkarma.com/entities/xiaomi-corp" target="_blank" data-smartkarma-citation="entities:24409:1" rel="noopener">Xiaomi Corp (1810 HK)</a>, a stock owned by just 2.71% of active GEM funds at a net underweight of -0.25%.</li>
<li>In total, 458 out of the 1215 stocks in the index meet this criteria and 225 of those are China A-Shares. The combined underweight for the unloved stocks comes to -8.89%.</li>
<li>Does it pay to avoid unloved stocks?  We have backtested a portfolio of EM Unloved stocks based on the screening criteria above, rebalanced monthly going back to 2008 and capped at 50 stocks. The performance suggests that Unloved stocks are best avoided, with consistent underperformance vs the I-Shares MSCI Emerging Markets ETF since 2008. </li>
</ul>

Many stocks in the benchmark MSCI Emerging Markets index are largely avoided by active investors.  To screen for unloved stocks, we filter our aggregated stock holdings data as follows:
Average Active Fund Weight &lt; I-Shares MSCI Emerging Markets ETF Weight (i.e net underweight)
Percentage of Funds Held &lt; 3% (i.e less than 3% of funds hold each stock).

The list is headed by Xiaomi Corp (1810 HK), a stock owned by just 2.71% of active GEM funds at a net underweight of -0.25%.
In total, 458 out of the 1215 stocks in the index meet this criteria and 225 of those are China A-Shares. The combined underweight for the unloved stocks comes to -8.89%.
Does it pay to avoid unloved stocks?  We have backtested a portfolio of EM Unloved stocks based on the screening criteria above, rebalanced monthly going back to 2008 and capped at 50 stocks. The performance suggests that Unloved stocks are best avoided, with consistent underperformance vs the I-Shares MSCI Emerging Markets ETF since 2008. 


Global Emerging Markets:  Unloved Stocks