It is no secret that investors are curious to know the attributing factors to a stellar or weak fund performance, and many refer to the Form 13F disclosure of the fund’s long only holdings. The Form 13F is a quarterly report mandated by the SEC for institutional investment managers with at least $100 million in equity assets under management to disclose U.S. equity holdings. Although the disclosed data is 45 days late, it acts as a good proxy to track funds which usually run net long, tend to hold securities long-term and has a portfolio mostly consisting high conviction picks.
However, this method of tracking has its pitfalls. The 13F disclosures lack coverage on short positions, giving investors only one side of the book. It is also difficult to use this method to track global macro funds and credit funds as most positions are tied up in asset classes which are undisclosed, such as futures, commodities, bonds and currencies as well as quant funds which employ algorithms for stock selection. There is also little public information on Asian funds as they are not required to file the quarterly 13F and most of their equity exposure is not U.S. based.
In response to this, the Quantflix team will be offering this predictive modelling service which estimates past fund returns to European clients with an interest in Asian funds.
We tested the parameters of our model using actual data from a long only fund featured on the Quantflix database - The Albizia ASEAN Opportunities Fund. The returns data was put through the model where back tests were run to generate the proportion of fund constituents which resemble the actual fund portfolio.
Figure 1: 1M Returns Comparison
Figure 2: YTD Returns Comparison
The fund information and 1M returns data for the previous year were input in the model for testing purposes. Our data accumulation techniques allowed us to better predict the fund’s future 1M returns, shown in Figure 1 where the data points on actual and projected performances tend closer to each other. Our predictive model suggests that the fund could potentially report a 3% gain in January 2019, which aligns with the stronger performance of Asian stocks as compared to late last year.