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

Cross Asset Strategy

<ul>
<li>GEM managers strengthen Indian exposure during the recent market turbulence.  Average weights now stand at 9.61%, up from a low of 8.69% at the end of March 2020.</li>
<li>Ownership levels have increased across Energy, Consumer Discretionary, Health Care and Tech sectors but decreased in Utilities, Real Estate, Materials and Financials.  </li>
<li>
<a href="https://www.smartkarma.com/entities/reliance-industries-ltd" target="_blank" data-smartkarma-citation="entities:198:1" rel="noopener">Reliance Industries (RIL IN)</a> makes leadership challenge, closing in on <a href="https://www.smartkarma.com/entities/hdfc-bank-ltd-4b6b7a92-9087-468d-9dbe-ab169e77f014" target="_blank" data-smartkarma-citation="entities:558:1" rel="noopener">HDFC Bank (HDFCB IN)</a> as India's most widely held stock.</li>
<li>Recent ownership increases have pushed <a href="https://www.smartkarma.com/entities/reliance-industries-ltd" target="_blank" data-smartkarma-citation="entities:198:1" rel="noopener">Reliance Industries (RIL IN)</a> to the 3rd most widely invested stock and the largest Indian holding on an average weight basis. </li>
</ul>Analysis taken from our Global Emerging Markets research, covering 243 EM active funds with combined AUM of $370bn.


GEM managers strengthen Indian exposure during the recent market turbulence.  Average weights now stand at 9.61%, up from a low of 8.69% at the end of March 2020.
Ownership levels have increased across Energy, Consumer Discretionary, Health Care and Tech sectors but decreased in Utilities, Real Estate, Materials and Financials.  

Reliance Industries (RIL IN) makes leadership challenge, closing in on HDFC Bank (HDFCB IN) as India's most widely held stock.
Recent ownership increases have pushed Reliance Industries (RIL IN) to the 3rd most widely invested stock and the largest Indian holding on an average weight basis. 
Analysis taken from our Global Emerging Markets research, covering 243 EM active funds with combined AUM of $370bn.

India:  Confidence Returns Among EM Active Managers

Managing Director

Elan Gore

TMI Data Science

TMI Data Science utilizes Natural Language Processing to build custom leading indicators using unstructured data sourced from the global financial, trade & traditional media.  Our proprietary software, TMI Machine, is a text-mining platform designed with the buy-side & capital markets professional in mind, text-mining the global media to discern and quantify nuanced qualitative shifts in press coverage as they apply to macroeconomics, equity indexes/ETFs, commodities, currencies, fixed income & individual equities.  TMI provides custom leading indicators and systematic trading strategies, operating at the nexus of linguistics & statistics drawing on vast experience in investment banking and hedge fund settings in senior quantitative and fundamental roles.  

TMI Data Science was founded by Elan Gore, an award-winning Senior Global Basic Materials Equity Analyst & China Economist with 15 years of experience in North American hedge funds & institutional managers; and Alessandro Porrino, Ph.D., an Algorithmic Trading Analyst and Programmer with 10 years of front-office experience ranging from complex FX option pricing to auto-hedging strategies at Bank of America Merrill Lynch and Standard Chartered.  Mr. Gore holds an MBA in Finance from New York University Stern School of Business, and Mr. Porrino holds a Ph.D. in Systems Engineering from Brunel University London.

<ul>
<li>As the street warms up to a potential Biden victory, arguments for improving equity breadth and cyclical rotation are starting to emerge again</li>
<li>Financial media references to a cyclical rotation saw a multi-STDEV spike in June, which coincided with a significant and notably enduring lift in the ratios of US industrials-to-staples and transports-to-staples </li>
<li>Our testing highlights the US transports-to-staples ratio as the most correlated with the cyclical rotation theme, but we see similar action in the copper/gold ratio and EM currencies</li>
<li>In the past 10 days, our text-mined data shows an incipient pro-cyclical move, but its momentum has yet to fully turn net-positive</li>
<li>Calls for a cyclical rotation softened through the September correction, COVID-19 second wave fears and more recent fiscal stimulus uncertainty; but the cyclical/defensive sector ratios endured as the structural reframing of a Biden presidency as an inflation-positive outcome went mainstream</li>
<li>While historically "cyclical rotation" and "value rotation" were strongly correlated, we have seen a decoupling in these themes due to the heavy burden of the COVID-19 crisis on financials and energy</li>
<li>Economists have pointed to the increased likelihood of a vaccine in H1 as a driver of recent bullishness and inflationary optimism, but observations from text mining and from the Superforecaster survey (Good Judgement Project) do not suggest new positives here</li>
<li>Predictably, at this stage of post-pandemic recovery the focus of cyclical rotation is on industrials and materials (particularly mining &amp; construction materials), with a Biden win implying elevated infrastructure spend</li>
</ul><div class="content-highlight">TMI Data Science utilizes Natural Language Processing to build custom leading indicators using unstructured data sourced from the global financial, trade &amp; traditional media. Our proprietary software text-mines the global media to discern and quantify nuanced qualitative shifts in press coverage as they apply to macroeconomics, equity indexes/ETFs, commodities, currencies, fixed income &amp; individual equities. </div>


As the street warms up to a potential Biden victory, arguments for improving equity breadth and cyclical rotation are starting to emerge again
Financial media references to a cyclical rotation saw a multi-STDEV spike in June, which coincided with a significant and notably enduring lift in the ratios of US industrials-to-staples and transports-to-staples 
Our testing highlights the US transports-to-staples ratio as the most correlated with the cyclical rotation theme, but we see similar action in the copper/gold ratio and EM currencies
In the past 10 days, our text-mined data shows an incipient pro-cyclical move, but its momentum has yet to fully turn net-positive
Calls for a cyclical rotation softened through the September correction, COVID-19 second wave fears and more recent fiscal stimulus uncertainty; but the cyclical/defensive sector ratios endured as the structural reframing of a Biden presidency as an inflation-positive outcome went mainstream
While historically "cyclical rotation" and "value rotation" were strongly correlated, we have seen a decoupling in these themes due to the heavy burden of the COVID-19 crisis on financials and energy
Economists have pointed to the increased likelihood of a vaccine in H1 as a driver of recent bullishness and inflationary optimism, but observations from text mining and from the Superforecaster survey (Good Judgement Project) do not suggest new positives here
Predictably, at this stage of post-pandemic recovery the focus of cyclical rotation is on industrials and materials (particularly mining &amp; construction materials), with a Biden win implying elevated infrastructure spend
TMI Data Science utilizes Natural Language Processing to build custom leading indicators using unstructured data sourced from the global financial, trade &amp; traditional media. Our proprietary software text-mines the global media to discern and quantify nuanced qualitative shifts in press coverage as they apply to macroeconomics, equity indexes/ETFs, commodities, currencies, fixed income &amp; individual equities. 

TMI Thematics: Cyclical Rotation Through The Lens of Text Mining

Chart based progressive global trading strategies, Chart Partners

Thomas Schroeder

Chart based progressive global trading strategies

Chart Partners

Chart Partners objective is to discover medium-term cycle turns and profit opportunities before they unfold, within structural trends while preserving capital with clear degrees of risk. We have real return ideas. 

Markets are dynamic and trading systems must reflect this. It is crucial to determine underlying correlations and lead-lag relationships within global markets and the impact on linked instruments. Our weekly Chartonics product gives you short-term trading strategies that can be applied within the medium and longer term macro trends that are mapped out in our strategy updates. 

Our methodology fuses global market variables and isolates drivers in trends. We specialize in FX, index trade in NY and Asia with a focus on Asian stocks. 

Technical Analysis

iShares MSCI Emerging Markets / Technical Analysis

EEM exhibited a high conviction rising wedge bear pattern at 45 and is now breaking 43.50 pivot support that opens the way for downside sell pressure. Previous updates have outlined the MSCI Asia x Japan topping cycle at 274 and EEM at 45.Our call for a stronger USD in EM and from DXY 92 also played into the compelling cycle peak for EM's.37.50 marks the bull/bear macro pivot to be tested in October with a primary downside objective at 39. Resistance lies just above 44 in the gap zone.

EEM exhibited a high conviction rising wedge bear pattern at 45 and is now breaking 43.50 pivot support that opens the way for downside sell pressure. Previous updates have outlined the MSCI Asia x Japan topping cycle at 274 and EEM at 45.Our call for a stronger USD in EM and from DXY 92 also played into the compelling cycle peak for EM's.37.50 marks the bull/bear macro pivot to be tested in October with a primary downside objective at 39. Resistance lies just above 44 in the gap zone. 

<ul>
<li>Last week we highlighted a downward shift in US inflation expectations, and our diffusion index of inflationary vs. deflationary expressions continues to soften (see <a href="https://www.smartkarma.com/insights/tmi-snapshot-cross-currents-in-the-us-rental-market-hint-at-pausing-inflation-expectations" target="_blank" data-smartkarma-citation="insights:43259" rel="noopener">TMI Snapshot:  Cross-Currents In The US Rental Market Hint At Pausing Inflation Expectations)</a>
</li>
<li>We believe this shift is largely responsible for unwelcome USD strength and recent pressures on precious metals as well as the overall commodity complex (as noted in <a href="https://www.smartkarma.com/insights/tmi-indicators-gold-sentiment-seeking-catalysts-following-latest-leg-up-on-us-benefit-expiration" target="_blank" data-smartkarma-citation="insights:43356" rel="noopener">TMI Indicators: Gold Sentiment Seeking Catalysts Following Latest Leg Up On US Benefit Expiration</a>)</li>
<li>While our inflation expectations note focused on emerging pressures in the US rental market and their impact on TIPS inflation breakevens, we must acknowledge that the psychology behind the emerging consensus inflationary mindset went into overdrive when extraordinary open-ended QE was perceived to be augmented by continued massive fiscal support and accelerated COVID-19 vaccine news flow</li>
<li>Our text mining sees an unprecedented spike in US political divisions coinciding with a sharp step down in fiscal stimulus expectations, as well as lowered expectations on the near-term availability of a COVID-19 vaccine</li>
<li>With two pillars of the emerging inflationary mindset now broken, the underlying narrative is seeing significant near-term challenges</li>
<li>As a potential post-election silver lining, our text mining sees a shift in perceptions of a Biden win from potentially disinflationary to inflationary (as Biden tax implications are now seen as less onerous and infrastructure investment potentially larger)</li>
<li>As long as uncertainty on post-election outcomes lingers, we suspect disinflationary pressures drive elevated vol, a stronger USD, continued pullback in precious metals &amp; the broader commodities complex, and a near-term shift away from the incipient cyclical/value rotations</li>
</ul><div class="content-highlight">TMI Data Science utilizes Natural Language Processing to build custom leading indicators using unstructured data sourced from the global financial, trade &amp; traditional media. Our proprietary software text-mines the global media to discern and quantify nuanced qualitative shifts in press coverage as they apply to macroeconomics, equity indexes/ETFs, commodities, currencies, fixed income &amp; individual equities. </div>


Last week we highlighted a downward shift in US inflation expectations, and our diffusion index of inflationary vs. deflationary expressions continues to soften (see TMI Snapshot:  Cross-Currents In The US Rental Market Hint At Pausing Inflation Expectations)

We believe this shift is largely responsible for unwelcome USD strength and recent pressures on precious metals as well as the overall commodity complex (as noted in TMI Indicators: Gold Sentiment Seeking Catalysts Following Latest Leg Up On US Benefit Expiration)
While our inflation expectations note focused on emerging pressures in the US rental market and their impact on TIPS inflation breakevens, we must acknowledge that the psychology behind the emerging consensus inflationary mindset went into overdrive when extraordinary open-ended QE was perceived to be augmented by continued massive fiscal support and accelerated COVID-19 vaccine news flow
Our text mining sees an unprecedented spike in US political divisions coinciding with a sharp step down in fiscal stimulus expectations, as well as lowered expectations on the near-term availability of a COVID-19 vaccine
With two pillars of the emerging inflationary mindset now broken, the underlying narrative is seeing significant near-term challenges
As a potential post-election silver lining, our text mining sees a shift in perceptions of a Biden win from potentially disinflationary to inflationary (as Biden tax implications are now seen as less onerous and infrastructure investment potentially larger)
As long as uncertainty on post-election outcomes lingers, we suspect disinflationary pressures drive elevated vol, a stronger USD, continued pullback in precious metals &amp; the broader commodities complex, and a near-term shift away from the incipient cyclical/value rotations
TMI Data Science utilizes Natural Language Processing to build custom leading indicators using unstructured data sourced from the global financial, trade &amp; traditional media. Our proprietary software text-mines the global media to discern and quantify nuanced qualitative shifts in press coverage as they apply to macroeconomics, equity indexes/ETFs, commodities, currencies, fixed income &amp; individual equities. 

TMI Snapshots:  More Signs Of Pressure on Inflation Expectations, USD Upside, And A Silver Lining

Copley Fund Research analyse the holdings of long only Mutual Funds. In this analysis, we focus on Global Emerging Market Funds.  Our GEM fund universe covers 250 actively managed strategies with a combined AUM of $365bn.  In our Macro Overview, we cover the following:• Asian allocations hit record highs, EM investors remain underweight.  LATAM key overweight. • T.I.C.K nations dominate EM portfolios, inflows in to China and Taiwan.  Outflows from Brazil, UAE, Turkey. • COVID response - managers up weights in Tech, Health Care and Comm Services.  Financials, Energy suffer.

Copley Fund Research analyse the holdings of long only Mutual Funds. In this analysis, we focus on Global Emerging Market Funds.  Our GEM fund universe covers 250 actively managed strategies with a combined AUM of $365bn.  In our Macro Overview, we cover the following:• Asian allocations hit record highs, EM investors remain underweight.  LATAM key overweight. • T.I.C.K nations dominate EM portfolios, inflows in to China and Taiwan.  Outflows from Brazil, UAE, Turkey. • COVID response - managers up weights in Tech, Health Care and Comm Services.  Financials, Energy suffer.

Emerging Market Positioning: Macro Overview

United States

iShares MSCI Emerging Markets ETF is an exchange-traded fund incorporated in the USA. The ETF tracks the performance of the MSCI TR Emerging Markets Index. The ETF holds emerging market stocks that can predominantly be classified as large and mid-cap. It weights the holdings using a market capitalization methodology and rebalances quarterly.

iShares MSCI Emerging Markets (EEM US)

India: Confidence Returns Among EM Active Managers

Global EM managers strengthen India exposure during the recent market turbulence. Ownership increases across Energy and Consumer Discretionary,...

Steven Holden

TMI Thematics: Cyclical Rotation Through The Lens of Text Mining

As the equity melt-up sees renewed "cyclical rotation" calls, we text-mine the global financial media to find early signs of recovery in the theme...

Elan Gore

EEM Bear Traction Below 43.50

EEM exhibited a high conviction rising wedge bear pattern at 45 and is now breaking 43.50 pivot support that opens the way for downside sell...

Thomas Schroeder

TMI Snapshots: More Signs Of Pressure on Inflation Expectations, USD Upside, And A Silver Lining

Last week we highlighted

Elan Gore

Emerging Market Positioning: Macro Overview

Copley Fund Research analyse the holdings of long only Mutual Funds. In this analysis, we focus on Global Emerging Market Funds. Our GEM fund...

Steven Holden