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Komfie Manalo, Opalesque Asia: The low breadth in the hedge fund industry and the financial market is causing crowdedness, but it’s not always a bad thing, said Katherine Grant, equity and hedge fund specialist of LGT Capital Partners.
Grant explained at the latest Opalesque 2016 New York Roundtable, "There are numerous ways to measure crowdedness, but we monitor the Goldman VIP list. Stocks on that list have actually outperformed over time. 2016 is the first year where it has massively underperformed – this is why crowdedness has become such an issue this year."
Grant said many fund managers feel they are obligated to deny they are not doing anything crowded because they feel that is what their investors want to hear.
She explained that investors should focus on these following points when the topic of crowdedness is discussed or detected with managers: 1) What's the information edge on this name and most importantly, 2) How will this [position] be sized and risk managed?
She went on to say, "Liquidity of these names is another consideration. Perry Capital winding down will most likely not affect the prices of Google or Facebook. These are crowded names, but given Google’s market cap, hedge fund deleveraging isn’t going to be a meaningful influence. Compare and contrast that with a mid-cap name and it’s a very different st...................... To view our full article Click here
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