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This is a neat idea, but it has a flaw. The flaw is that Navlio is basing the recommendations on long equity positions (as well as other securities reported in

by vonnik 11y ago

This is a neat idea, but it has a flaw. The flaw is that Navlio is basing the recommendations on long equity positions (as well as other securities reported in HFs' 13F filings). But hedge funds hedge their bets -- hence the name -- by placing more complicated bets than just buying long, and that includes short sales. You don't have to report short sales in a 13F. https://www.sec.gov/divisions/investment/13ffaq.htm https://www.sec.gov/divisions/investment/13ffaq.htm If you don't know both sides of HFs' bets, you actually have no idea how they feel about a company. They could have a big long position and a bigger short that's not reported. It's central to a hedge fund's business to conceal the kind of bets they are making, and what they plan to do, until the precise moment that it benefits them for the rest of the market to pile in.

danieltillett 11y ago
I am not sure why your post is being ignored. Having half the information that is biased in an unknown direction and not randomly selected is worse than having no information. If you have no information at all you will just guess and be right half the time (after accounting for risk/return), while if you have biased information you just get to be on the other side of an informed trade (ie be the sucker).
- mehrdada 11y ago
  Technically, having biased information can't be worse than having no information (i.e. you can choose to ignore it if you know it is biased and you can try figuring out how and in what direction it is biased). What's worse in this scenario is not the information itself, but incorrectly assuming the information is unbiased.
  - danieltillett 11y ago
    Only if you know the direction it is biased. If you don’t know this then you are just a sucker in someone else game. Imagine a coin tossing game where I know the result of a toss and you don’t, but where I can set the size of the bets. Every time you choose correctly I set the bet low and every time you choose incorrectly I set the bet high. It won’t take me long to completely fleece you despite the odds of you and me being right being 50/50 each time. This is a simple analogy of betting against a hedge fund when you only have access to biased information of their strategy and they know this and can use it to induce you to bet high on a losing bet.
navlio 11y ago
Thanks for this feedback-- It's very accurate that 13Fs do not pick up hedge fund activity such as short sales and derivatives. 13Fs are not necessarily comprehensive of all of a single hedge fund's positions as certain funds sometimes make amendments at a much later date. Hedge funds, particularly activist funds, do sometimes try to conceal the stocks they buy - usually by using derivatives which have different disclosure requirements. However, it is pretty rare for a hedge fund to be long and short the same stock unless they are doing it for tax reasons - this does not happen often. Going long a stock to create confusion about a short position (which is not disclosed) does not happen in the wild. We believe that "knowing" in the aggregate just the stocks that managers are long has value. It is noteworthy that equity long/short strategies take a few quarters to materialize so using quarterly data is still valuable (hence we have excluded hedge funds that follow a short term statistical arbitrage strategy with many positions and very high turnover).
- vonnik 11y ago
  I think there is value in what you are doing, as long as everyone knows what context to put the information in, and realizes that they may lack significant additional information. In the wild, HFs are actively engaged in sending misinformation to the market in a number of ways, by running different sides of a trade through different prime brokers, etc. I have no doubt that some of them are sending information via their 13Fs that is meant to be misinterpreted.
- verycurious 11y ago
  Is it possible to have someone from navlio contact me? Is there a contact email or number for navlio?
  - deleted 11y ago
    [deleted]
  - navlio 11y ago
    Apologies - we were having some issues with our email. You can reach us at NavlioTeam@gmail.com

by vonnik 11y ago

danieltillett 11y ago

I am not sure why your post is being ignored. Having half the information that is biased in an unknown direction and not randomly selected is worse than having no information. If you have no information at all you will just guess and be right half the time (after accounting for risk/return), while if you have biased information you just get to be on the other side of an informed trade (ie be the sucker).

mehrdada 11y ago
Technically, having biased information can't be worse than having no information (i.e. you can choose to ignore it if you know it is biased and you can try figuring out how and in what direction it is biased). What's worse in this scenario is not the information itself, but incorrectly assuming the information is unbiased.
- danieltillett 11y ago
  Only if you know the direction it is biased. If you don’t know this then you are just a sucker in someone else game. Imagine a coin tossing game where I know the result of a toss and you don’t, but where I can set the size of the bets. Every time you choose correctly I set the bet low and every time you choose incorrectly I set the bet high. It won’t take me long to completely fleece you despite the odds of you and me being right being 50/50 each time. This is a simple analogy of betting against a hedge fund when you only have access to biased information of their strategy and they know this and can use it to induce you to bet high on a losing bet.

navlio 11y ago

Thanks for this feedback-- It's very accurate that 13Fs do not pick up hedge fund activity such as short sales and derivatives. 13Fs are not necessarily comprehensive of all of a single hedge fund's positions as certain funds sometimes make amendments at a much later date. Hedge funds, particularly activist funds, do sometimes try to conceal the stocks they buy - usually by using derivatives which have different disclosure requirements. However, it is pretty rare for a hedge fund to be long and short the same stock unless they are doing it for tax reasons - this does not happen often. Going long a stock to create confusion about a short position (which is not disclosed) does not happen in the wild. We believe that "knowing" in the aggregate just the stocks that managers are long has value. It is noteworthy that equity long/short strategies take a few quarters to materialize so using quarterly data is still valuable (hence we have excluded hedge funds that follow a short term statistical arbitrage strategy with many positions and very high turnover).

vonnik 11y ago
I think there is value in what you are doing, as long as everyone knows what context to put the information in, and realizes that they may lack significant additional information. In the wild, HFs are actively engaged in sending misinformation to the market in a number of ways, by running different sides of a trade through different prime brokers, etc. I have no doubt that some of them are sending information via their 13Fs that is meant to be misinterpreted.
verycurious 11y ago
Is it possible to have someone from navlio contact me? Is there a contact email or number for navlio?
- deleted 11y ago
  [deleted]
- navlio 11y ago
  Apologies - we were having some issues with our email. You can reach us at NavlioTeam@gmail.com