Hedge Funds Declare Buyer's (And Seller's) Strike: Q4 Position Turnover Drops To Record Low

Tyler Durden's picture


In a world in which there is no risk, only return (thank you Federal Reserve Risk Management LLC), hedge funds - used to generating Profits just by sitting on legacy positions - see no need to reallocate their portfolios. Nowhere was this more evident than in the position turnover in Q4. As Goldman calculates, total asset turnover in Q4 dropped to 28% - a new all time low. In fact, the only increase in turnover, either buying or selling, was in the tech and infotech spaces. Everything else saw an unprecedented buyers and sellers strike.


Needless to say, this explains the epic, and ongoing, collapse in trading volumes: since nobody is repositioning their portfolios, there is virtually no trading volume, and as a result stocks move, higher of course, on ever lower and lower trading block size. Which means that if and when the current regime fails, and the real block size re-emerges, watch out below. It also means that banks which are reliant on flow trading commission for revenues, are out of luck again, as there is virtually no flow to speak of.

Finally, for those curious what diversification means for hedge funds, the following chart shold explain it:

What it means is that Hedge fund returns are highly dependent on the performance of a few key stocks. The typical hedge fund has an average of 63% of its long-equity assets invested in its 10 largest positions compared with 31% for the typical large-cap mutual fund, 22% for the average small-cap mutual fund, 18% for the S&P 500 and just 3% for the Russell 2000 Index.

This is good when said 10 largest positions perform well. Naturally, once the Fed's all too visible hand is pulled from under the market, it may be time to consider other options.

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Fri, 02/21/2014 - 10:56 | 4461744 buzzsaw99
buzzsaw99's picture

ain't nobody selling jack shit

Fri, 02/21/2014 - 11:06 | 4461773 johnQpublic
johnQpublic's picture

early threadjack wit a must read link from someone who gets it



live censored speech you never heard about

thank me later , but down arrow me now

Fri, 02/21/2014 - 15:19 | 4462745 asteroids
asteroids's picture

Blame the fucking FED. As long as there is POMO, the market will drift up.

Fri, 02/21/2014 - 10:57 | 4461748 vote_libertaria...
vote_libertarian_party's picture

well duhhhhhhhh.  As soon as anybody sells 10 shares everything crashes.

Fri, 02/21/2014 - 10:59 | 4461750 vote_libertaria...
vote_libertarian_party's picture

well duhhhhhhhh.  As soon as anybody sells 10 shares everything crashes.

Fri, 02/21/2014 - 10:59 | 4461752 _ConanTheLibert...
_ConanTheLibertarian_'s picture

well duhhhhhhhh.  As soon as anybody sells 10 shares everything crashes.

Fri, 02/21/2014 - 11:01 | 4461759 _ConanTheLibert...
_ConanTheLibertarian_'s picture

Silence before the storm. Receding water before the tsunami. Spring being loaded etc. etc.

Fri, 02/21/2014 - 11:07 | 4461775 fonzannoon
fonzannoon's picture

Tyler is salivating over that existing home sales report. this should be good.

first time home buyers were the lowest since they started measuring, lol.

Fri, 02/21/2014 - 11:22 | 4461804 RSloane
RSloane's picture

Overall trading volume has been relatively low for the last three years, so much so that when it appears to spark to life for whatever reason people are shocked and think its a harbinger of something dreadful.

I read this morning that the futures were rising ahead of a great housing report. Somebody is going to have to fix their headers.


Fri, 02/21/2014 - 11:08 | 4461778 Winston Churchill
Winston Churchill's picture

'You have to destroy all the markets. to save them'.

Ben 'napalm' Bernanke.

Fri, 02/21/2014 - 11:10 | 4461779 Dr. Engali
Dr. Engali's picture

Damn you mean the squid can't churn and burn the client's accounts? Why that's down right unMerikan! Fuck you BernankaYellen!

Fri, 02/21/2014 - 12:19 | 4462075 firstdivision
firstdivision's picture

That exit door looks mighty small

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