If you are a serious investor, your sweetheart was likely mad at you on Valentine’s Day. That’s because you were studying the 14,000 different investment positions that hedge fund giant Citadel had at year-end.
Every Feb. 14, big money managers are required to file 13F forms with the U.S. Securities and Exchange Commission, revealing many of their Dec. 31 holdings. Among the notable new buys at the largest hedge funds were names like
and
Oracle
.
The best investment results in recent years have been those of “multistrategy” hedge funds like Ken Griffin’s Citadel Advisors and Izzy Englander’s Millennium Management. Their consistent, large returns might make poring over their13Fs seem like a tempting way to ride their coattails without paying their steep management fees.
Beware. The high-turnover, complex strategies of the multi-strat shops make their 13Fs the hardest to interpret on all of Wall Street.
With some $60 billion managed by dozens of teams, Citadel’s December 13F discloses positions worth hundreds of billions in the aggregate, thanks to leverage. To analyze Citadel’s changes, and those of other multistrats, we went to the website 13F.info operated by the data scientist Todd Schneider.
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Over 680 of Citadel’s year-end positions exceeded $100 million apiece. Many of the largest were market bets made with exchange-traded funds like the
Trust, which multistrats use to keep their overall portfolio from rising or falling with the market’s tide.
Citadel’s largest reported bets on common stocks were, unsurprisingly, the large-cap stocks
Nvidia
,
and
From September to December, the fund’s 13Fs show a tripling of the Amazon shareholdings, a roughly 75% boost in Nvidia, and about a 15% reduction in Microsoft. But the fund’s bets on stocks aren’t confined to common shares.
Along with its shareholdings, Citadel had put and call option bets on those three names, and many others in its portfolio. The reported value of Citadel’s bearish and bullish options on those three big names actually exceeded its stock positions. The option reporting in a 13F is almost uninterpretable, noted the financial-data expert Byrne Hobart in his blog last year, because the entries only show the total value controlled by the options—not their dates or strike prices.
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And 13Fs include no information at all on short sales or swap trades. That mean that the real size and direction of a hedge fund’s bet on a stock can be the opposite of what its 13F might suggest, Hobart explained.
More informative moves in a multistrat’s 13F might be the really, really big share purchases. Among Citadel’s $100 million bets, about 30 increased by 1,000% or more, between the September and December filings, including common holdings of
and
Visa
.
Again, there were options bets on all three whose notional value exceeded the size of the common stock positions—but the overall direction on three names all appeared to be bullish. At least they were on Dec. 31.
Among its big positions, there were smaller-cap stocks in which Citadel’s December quarter increases were even more dramatic. Its shareholdings in chip-designer software supplier
Synopsys
,
security software vendor
and the genetic testing frim
each jumped by more than 50,000% from the end of September.
Millennium is the other multistrat firm whose assets under management exceed $60 billion. Its December 13F showed about 400 positions over $100 million each.
A dozen of those big Millennium’s shareholdings jumped by more than 1,000% in the quarter. The largest-cap names in that bunch were health insurer
the retailer
TJX Cos
.
, industrial gas supplier
Linde
,
and casualty insurer
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Shareholdings in Progressive jumped almost 48,000%, with only a very modest offsetting options hedge. The big purchases of Cigna, Linde, and TJX shares were also offset by relatively small opposing options bets.
The very biggest jumps in shareholdings at Millennium included smaller names like the British heating and plumbing supplier
Ferguson
,
the regional bank
eBay
,
and the data-analysis software supplier
D.E. Shaw is the big quant shop that’s quietly put up one of the best long-term records. Among its $100 million-plus positions, the December 13F reveals a 3,500% jump in Shaw’s holdings of chip maker
with a relatively small offsetting option hedge. Holdings in
stock rose some 670%, also with only a smallish negative options hedge. The fund’s shareholdings of
grew nearly 1,000% in the quarter, but accompanied by sizable opposing options positions.
Somewhat smaller multistrategy managers that nevertheless have wide followings are Steve Cohen’s Point72 and Nicholas Maounis’s Verition Fund Management. Their 13Fs seem to point in clearer directions than those of larger firms.
Point72 reported about 90 positions exceeding $100 million, in its December filing. New and largely unhedged bets appeared on the energy giants
and
New software bets included
and
HubSpot
.
Other new or greatly increased positions included
Clorox
,
defense firm
chemical giant
3M
,
home builder
Lennar
,
biotech firms
and
Repligen
,
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and
The hedge fund Verition is smaller still, but showed about 20 positions above $50 million each in its December 13F. Those with more than a 1,000% increase in shareholdings, and seemingly modest options hedges, included Walt Disney, the utility
Google-parent
Alphabet
,
the videogame publisher
and the weight-loss drug leader
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It’s important to remember that the multistrat firms avoid big drawdowns by being fleet on their feet—so the 45-day old snapshot in their 13Fs may be dated before it appears.
These filings are no shortcut to market-beating performance, or “alpha,” the data maven Byrne Hobart warns, because the better-known a money manager is, the more people are studying its 13Fs.
So the changes found in a 13F should only be the starting point of any investor’s research.
Write to Bill Alpert at william.alpert@barrons.com
