Asset Allocation & Fund Positioning, Copley Fund Research

Steven Holden

Asset Allocation & Fund Positioning

Copley Fund Research

Copley Fund Research provide research and data on asset allocation among Global and Emerging Market equity funds.  The analysis details absolute and relative positioning across countries, sectors and industries together with highly granular data on single stock and single fund allocations.  The data is updated monthly with time series going back to January 2011.

Global Research - Analysis of 165 prominent Global equity funds, combined AUM $335bn
GEM Research - Analysis of 127 prominent global EM equity funds, combined AUM $250bn

Asset Allocation - Global and GEM Equity

Thematic (Sector/Industry)

US Financial stocks are a key holding for Global active managers.  Average weights stand at 6.38% among the 383 Global funds in our analysis, the 3rd largest global country/sector allocation.After a heavy sell of during the first few months of COVID-19, allocations bottomed out in August 2020 and turned sharply to the upside.  US Financials captured some of the largest ownership increases among global country/sector peers, moving from underweight to overweight in the process.<a href="https://www.smartkarma.com/entities/morgan-stanley" target="_blank" data-smartkarma-citation="entities:1122:1" rel="noopener">Morgan Stanley (MS US)</a> has broken out to new highs in active fund ownership, <a href="https://www.smartkarma.com/entities/jpmorgan-chase-co" target="_blank" data-smartkarma-citation="entities:277:1" rel="noopener">JPMorgan Chase &amp; Co (JPM US)</a> is the most widely held Financial stock, whilst <a href="https://www.smartkarma.com/entities/citigroup-inc" target="_blank" data-smartkarma-citation="entities:279:1" rel="noopener">Citigroup Inc (C US)</a> exposure remains subdued.There are few signs of confidence levels abating or that managers are overly exposed to the sector, either on an absolute basis or relative to benchmark.  Therefore, we see it as low risk that managers will look to scale back exposure at this juncture.

US Financial stocks are a key holding for Global active managers.  Average weights stand at 6.38% among the 383 Global funds in our analysis, the 3rd largest global country/sector allocation.After a heavy sell of during the first few months of COVID-19, allocations bottomed out in August 2020 and turned sharply to the upside.  US Financials captured some of the largest ownership increases among global country/sector peers, moving from underweight to overweight in the process.Morgan Stanley (MS US) has broken out to new highs in active fund ownership, JPMorgan Chase &amp; Co (JPM US) is the most widely held Financial stock, whilst Citigroup Inc (C US) exposure remains subdued.There are few signs of confidence levels abating or that managers are overly exposed to the sector, either on an absolute basis or relative to benchmark.  Therefore, we see it as low risk that managers will look to scale back exposure at this juncture.

Silver Point

Thomas J. Monaco

Silver Point is a boutique research firm that focuses on the broader financial services sector, with a particular focus on troubled institutions globally. 

Asia Ex Japan

*Staring Into The Abyss: Although the market has rebounded since March, we were very close to looking into the abyss with the S&amp;P 500 closing in on 2000 (or lower). The problems with market structure remain in place, despite the wall of liquidity thrown at markets by central bankers across the globe – posing an existential crisis;*Tail Wagging The Dog: The remote tail risk for single sector/security/levered ETFs/ETNs has been known for some time now following the VIX blowup in 2018  - but the USO ETF blow-up was even more spectacular given the multiplier impact on the global economy.  An even bigger problem resides in broader market ETFs as there is no restriction on liquidity and the resulting order imbalances could result in the inability of ETFs to provide the required physical exposure to underlying securities; and  *Regulatory Screws Too Tighten: Unfortunately, significantly more financial sector regulation is coming to address the existential threats of massive liquidity.

*Staring Into The Abyss: Although the market has rebounded since March, we were very close to looking into the abyss with the S&amp;P 500 closing in on 2000 (or lower). The problems with market structure remain in place, despite the wall of liquidity thrown at markets by central bankers across the globe – posing an existential crisis;*Tail Wagging The Dog: The remote tail risk for single sector/security/levered ETFs/ETNs has been known for some time now following the VIX blowup in 2018  - but the USO ETF blow-up was even more spectacular given the multiplier impact on the global economy.  An even bigger problem resides in broader market ETFs as there is no restriction on liquidity and the resulting order imbalances could result in the inability of ETFs to provide the required physical exposure to underlying securities; and  *Regulatory Screws Too Tighten: Unfortunately, significantly more financial sector regulation is coming to address the existential threats of massive liquidity.

Providing Crack To An Addict Is Not A Sustainable Global Strategy

* Oil Price Dislocation Continues: Last week, US West Texas Intermediate (WTI) crude futures closed at a negative USD 37.63 per barrel (bbl) [yes, negative] on what appears to be retail driven margin calls (where selling  accelerated into the close)  - this after the Chicago Mercantile Exchange (CME.US) [CME] agreed to allow contract prices to go negative;* CME Making Changes For USO: USO disclosed that the Chicago Mercantile Exchange (CME.US) has ordered it to limit holdings of June WTI futures contracts to no more than 10,000 due to "regulator concerns about the size of its position". In addition, USO will need to hold more cash in order to satisfy higher margin requirements from clearing members. More regulation is coming, as there is no other choice. When will Singapore Exchange (SGX.US) actually address the oil price dislocation?; and *High Yield/CLO Risk About to Hit The Fan: For the high yield market, there looks to be over USD 200 bn of non-investment grade energy debt with the principal problem residing in the “B3/CCC” leveraged loan market.

* Oil Price Dislocation Continues: Last week, US West Texas Intermediate (WTI) crude futures closed at a negative USD 37.63 per barrel (bbl) [yes, negative] on what appears to be retail driven margin calls (where selling  accelerated into the close)  - this after the Chicago Mercantile Exchange (CME.US) [CME] agreed to allow contract prices to go negative;* CME Making Changes For USO: USO disclosed that the Chicago Mercantile Exchange (CME.US) has ordered it to limit holdings of June WTI futures contracts to no more than 10,000 due to "regulator concerns about the size of its position". In addition, USO will need to hold more cash in order to satisfy higher margin requirements from clearing members. More regulation is coming, as there is no other choice. When will Singapore Exchange (SGX.US) actually address the oil price dislocation?; and *High Yield/CLO Risk About to Hit The Fan: For the high yield market, there looks to be over USD 200 bn of non-investment grade energy debt with the principal problem residing in the “B3/CCC” leveraged loan market.

Oil – Trying To Get Dislocation Under Control

US Financials allocations continue to drift lower, however they remain widely held among active managers. Banks are the key driver behind the move, though Capital Markets stocks are bucking the trend.The analysis is taken from our Global Fund Universe of 413 global equity funds with a combined AUM of $760bn.

US Financials allocations continue to drift lower, however they remain widely held among active managers. Banks are the key driver behind the move, though Capital Markets stocks are bucking the trend.The analysis is taken from our Global Fund Universe of 413 global equity funds with a combined AUM of $760bn.

US Financials: Banks Overhang, Capital Markets Gain.

Technical Analyst, Vermilion Research

Joe Jasper

Technical Analyst

Technical and Quantitative Research

Vermilion Research

Vermilion’s objective is to deliver timely, actionable, and unique technical research to professional investors through the application of our various technical indicators.

Our research strategists seek to highlight securities which we believe are at major inflection points, based on our various technical and quantitative indicators, and offer asymmetric risk/return profiles. Our unique research methodology, centered on relative strength, enables our strategists to deliver superior investment recommendations.

Our process begins by organizing the universe of actively traded stocks into discrete sectors, then into industry groups. We then apply our technical and quantitative tools to identify developing price trends. Once attractive trends are identified within a selected sector or group, we screen for individual stocks which we believe offer the best risk/reward profile. We provide a historical perspective that often reveals, through our long-term charts, how price patterns often repeat themselves over time.

Technical Analysis

Nasdaq-100 Stock Index / Technical Analysis

In today’s report we outline  our belief that the combination of extreme oversold conditions and several key sectors/industries holding above major long-term support lead us to believe an important bottom has been established. We also highlight attractive Groups and stocks within Staples, Financials, and Health Care: Large- &amp; Small-Cap Soft Drinks &amp; Bottlers, Electronic Exchanges/Markets, and Large- and Mid-Cap Biotech.

In today’s report we outline  our belief that the combination of extreme oversold conditions and several key sectors/industries holding above major long-term support lead us to believe an important bottom has been established. We also highlight attractive Groups and stocks within Staples, Financials, and Health Care: Large- &amp; Small-Cap Soft Drinks &amp; Bottlers, Electronic Exchanges/Markets, and Large- and Mid-Cap Biotech.

A Bottom Has Been Established; Possible Retest?

United States

CME Group Inc. operates a derivatives exchange that trades futures contracts and options on futures, interest rates, stock indexes, foreign exchange and commodities.  The Exchange brings together buyers and sellers of derivatives products on its trading floors, electronic trading platform, and through privately negotiated transactions that it clears.

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CME Group (CME US)

US Financials: Back in Vogue

After a heavy sell of during the first few months of COVID-19, US Financials exposure bottomed out in August 2020 and turned sharply to the...

Steven Holden

Providing Crack To An Addict Is Not A Sustainable Global Strategy

*Staring Into The Abyss: Although the market has rebounded since March, we were very close to looking into the abyss with the S&P 500 closing...

Thomas J. Monaco

Oil – Trying To Get Dislocation Under Control

* Oil Price Dislocation Continues: Last week, US West Texas Intermediate (WTI) crude futures closed at a negative USD 37.63 per barrel (bbl) [yes,...

Thomas J. Monaco

US Financials: Banks Overhang, Capital Markets Gain.

US Financials allocations continue to drift lower, however they remain widely held among active managers. Banks are the key driver behind the move,...

Steven Holden

A Bottom Has Been Established; Possible Retest?

In today’s report we outline our belief that the combination of extreme oversold conditions and several key sectors/industries holding above major...

Vermilion Research

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