undergraduate student investment management fund panosian jasmine anglen paul farrington sean...

Undergraduate Student Investment Management Fund

Semi-Annual Presentation

Friday December 6th, 2013

1

Undergraduate SIM Fund

Introduction

Research Implementation

Overview Insider Transactions

Portfolio Construction

ADR Momentum

Student Investment Management Fund

Fund Members Fund Managers Fund Analysts

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Dakota Boyd

Clayton Jenners Adrian Reiter Andrew Farber Dylan King James Hert

Tro Panosian

Jasmine Anglen Logan Hurst

Paul Farrington Sean Gormley Alex Green Alasandro Fenston Vikas Bhagavatula

Justin Eastman

Marcus Schafer

Kyle Heck


Introduction




ADR Momentum


Insider transactions:

• Continue to develop more automated implementation

• Develop more informative signal, adjust weighting scheme

ADR Momentum:

• Diversify to international

• Avoid Universe overlap and conflicting trade signals

• Implement completely new strategy

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Introduction




ADR Momentum


Portfolio Strategy

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10%

10%

20%

20%

20%

20%

ADR Constituent 1

ADR Constituent 2

Insider Constituent 1





Introduction




ADR Momentum


Portfolio Composition

Insider Transactions

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Introduction




ADR Momentum


Insider Research • “Decoding Inside Information” – October 2010

• By: Lauren Cohen, Christopher Malloy, & Lukasz Pomorski

• Data Parameters • Form 4 – filed within 2 days of trade

• January, 1986 to December, 2007.

• Open-market purchases and sales

• Exclude options exercises and private transactions

• “Opportunistic” vs. “routine” traders

• Excess monthly returns • Opportunistic buys: 1.58%

• Routine buys: 0.87%

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Introduction




ADR Momentum


Classifying Insiders

Su M T W Th F Sa Su M T W Th F Sa Su M T W Th F Sa

X = Routine Trader

2011 2012 2010

December

7

X

X X X

X

X

X = Opportunistic Trader


Introduction




ADR Momentum


Sorting & Filtering

Classify Insiders

IPO Filter – 3 Years

Current Week’s Transaction

Rank: Net Buyers – Net Sellers

Market Capitalization Filter >$1.1bn

8


Introduction




ADR Momentum


Portfolio Strategy

9

Week 1

VRX

ABM

ACN

COV

ED

DVA

PCYC

ERIE

T

BRC

Week 3

BCOR

MDLZ

Y

SSS

AYR

FICO

EOG

SANM

ANDE

GPN

Week 2

AYR

SNV

RDN

MOG-A

FAST

NLY

RLI

HTS

CDE

PXD

Week 5

ACWI

ROLL

XOMA

BAC

KO

FCX

MPC

ORCL

PG

MRK


Introduction




ADR Momentum


Week 4

GMCR

HMSY

LEG

SPG

WEC

KMT

PPS

MOG-A

NCT

OKE

ADR Momentum

10


Introduction




ADR Momentum


What is Momentum? • Jegadeesh and Titman

• Buy past winners, short past losers

• Time period: 1965 to 1989

• Calculated monthly returns for a variety of portfolios

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Introduction




ADR Momentum


International Momentum • Rouwenhorst

• Time period: 1980-1995

• International Momentum: • 12 developed countries • Ex. Austria, U.K, France, Germany, Spain

• Emerging Market Momentum: • 20 emerging countries

• Showed that momentum existed in International Equity

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Introduction




ADR Momentum


Portfolio Strategy • Lookback period : 12 months

• -12 to -2

• Rank ADR’s based on returns

• Invest in top decile

• Holding period: 2 months

• 2 rolling portfolios

• Any repeat signals will trigger a rebuy

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Dec. Nov.

Calculate returns Reversal

Dec. Buy Feb. Sell

Hold

Nov. Buy Jan. Sell

Hold


Introduction




ADR Momentum


Backtest • Monthly return data for all ADR’s

• Time period: 1980 – 2012

• Sample size : 396 months

• Outperformed Benchmark by: • .35% monthly

• 4.31% yearly

2 Month HP Statistics (MOM)

Avg Mnthly RET: 1.35%

Avg Yearly RET: 17.47%

Std Dev: 6.26% $0.10

$1.00

$10.00

$100.00

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12

DO

LLA

R V

ALU

E DATE

Growth of $1 Invested (Log)

Momentum Portfolio Equal-Weighted Benchmark

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Introduction




ADR Momentum


ADR Universe Over 2,500 ADR’s on

Bloomberg

Exchange Filter: • NYSE, AMEX, NASDAQ

Market Cap Filter: • Over $1.1 Billion

Volume Filter: • Over 150,000 shares

average daily trading

Investable Universe: • 149 ADR’s

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Introduction




ADR Momentum


Bloomberg Web Scraper

Retrieve daily price data for the last year for each ADR

Calculates Momentum Returns.

Ranks universe based on momentum returns

Outputs the top decile (14 ADR’s)

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Introduction




ADR Momentum


Filtering the Top Decile • Country of Origin Cap

• [ # of ADRs for x country / total # of ADRs ] • Capped most of our countries at 1 security

• 35% filter • No country could make up more than 35% of our portfolios

• Max of 5 stocks per country per portfolio

17

Ticker Country VIPS China

HIMX Taiwan

YGE China

TSL China

QIHU China

NOAH China

ALU France

BITA China

SFUN China

CTRP China

NOK Finland

IRE Ireland

MPEL Hong Kong

EJ China

Ticker Country VIPS China

HIMX Taiwan

QIHU China

ALU France

SFUN China

CTRP China

NOK Finland

IRE Ireland

MPEL Hong Kong

EJ China

NMR Japan

BFR Argentina

YPF Argentina

TEO Argentina


Introduction




ADR Momentum


Holdings

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Introduction




ADR Momentum


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Introduction




ADR Momentum


52.99

21.92 25.24

18.24

0

10

20

30

40

50

60

ADR Momentum Insider Trading Aggregate Russell 3000

Portfolio Holdings – P/E Ratio Analysis

47%

26%

27%

Aggregate

Large Cap Mid Cap Small Cap

20

71%

15%

14%

ADR Momentum

42%

30%

28%



Introduction




ADR Momentum


Portfolio Holdings - Size

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Introduction




ADR Momentum


Portfolio Holdings - Sector

19%

27%

3% 7% 4%

11%

17%

6% 3% 3%

Aggregate Portfolio

Information Technology Financials Consumer Discretionary Energy

Telecommunication Services Health Care Industrials Consumer Staples

19%

15%

15% 13%

12%

9%

8%

5% 4%

Russell 3000

17%

27%

6% 3%

14%

20%

7% 3% 3%


34%

30%

20%

9%

7%

ADR Momentum

Conclusion

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Introduction




ADR Momentum


23


Introduction




ADR Momentum


Portfolio Returns Benchmark Returns

ADR 1.87% -0.0002% (Custom)

Insider 1.06% 0.35% (Russell 3000)

Aggregate 0.81% 0.35% (Russell 3000)

Portfolio Performance

24


Introduction




ADR Momentum


Case Study: Moog Incorporated • MOG.A – Moog Incorporated

• Designs control systems for Aerospace and Defense Industries

• Week of 11/11/2013 through 11/15/2013 Insider Transactions generate buy signal

• Purchase order Submitted by SIM Fund on 11/18/2013

• 11/19/2013 Moog Announces call back of $200MM, 7.25% Senior Subordinated Notes

• Continue weekly tracking of performance, attribution and holdings

• Long/Short simulation for Insider and ADR portfolios

• Signal Strength optimization for Insider

• Continue to automate as much of the seeding process as possible

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Introduction




ADR Momentum


Future Plans

Questions?

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Introduction




ADR Momentum


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