13Fs: Does the 45-Day Delay Matter?

I’ve written dozens of posts here on the blog since ’06 on the topic of 13F research (older post here for example).  An analyst and I used to cobble together the 13Fs and backtests by hand, a long an arduous process.  However, over the years that process has allowed a number of insights to flow through that are hard to realize any other way than just getting your hands dirty.  Findings such as what funds to track, what holdings to track, what strategies to track, etc have been discussed here and in our book The Ivy Portfolio – often insights that have not been presented elsewhere.  So, below I wanted to tackle a topic that I hear almost every single time 13Fs come up – namely, does the 45 day delay matter in tracking these top hedge fund manager stock picks?

Below we do a quick test, and note it is not comprehensive.  There are inherent biases no matter how you chop up the data (how many funds to include, long/short only or entire universe, include dead funds, regress the returns based on turnover and AUM? etc etc)  but we look at 20 funds we have been following for years on the blog.  We compare reblancing on the 13F filing date to rebalancing a portfolio at the quarter end (ie look ahead bias investors do not have).  It shows how a portfolio constructed without the 45-day delay compares to a portfolio with publicly available information.  Tests go back to 2000, total return data with no transaction costs.

Q:  So, does the 45-day delay matter?

A:  A little.

While there is wide variation across the funds (to be expected), the delay ranged anywhere from a 3%+ penalty for a few funds (Greenlight, Icahn), to a 1%+ CAGR benefit (Tiger Global, Libra).  Overall the friction in the delay averages about 1.5% per annum (similar for both manager weighted returns as well as equal weighted returns).  Another aside is that it doesn’t matter a whole lot when you rebalance after the disclosure (ie there isn’t much of a bounce from the filings becoming public plus or minus five days).

We are running this study with a larger dataset, and  findings we may or may publish in a longer form white paper when we get around to it.

Next up on the blog are some videos on dynamic risk parity, equity income strategies, and currency strategies.

Funds included in the study:

APPALOOSA MANAGEMENT LP
BAUPOST GROUP LLC
BERKSHIRE HATHAWAY INC
GREENLIGHT CAPITAL INC
JAG HOLDINGS LLC
MAVERICK CAPITAL LTD
PRIVATE CAPITAL MANAGEMENT INC
RELATIONAL INVESTORS LLC
COBALT CAPITAL MANAGEMENT INC
HIGHFIELDS CAPITAL MANAGEMENT LP
CHESAPEAKE PARTNERS MANAGEMENT CO
THIRD POINT MANAGEMENT CO LLC
EMINENCE CAPITAL LLC
ICAHN CARL C ET AL
VIKING GLOBAL INVESTORS LP
ATLANTIC INVESTMENT MANAGEMENT INC
SECOND CURVE CAPITAL LLC
AKRE CAPITAL MANAGEMENT LLC
BRIDGER MANAGEMENT LLC
GLENVIEW CAPITAL MANAGEMENT LLC
LIBRA ADVISORS INC
TIGER TECHNOLOGY MANAGEMENT

Source:  Bloomberg