A Look At Hedge Fund Internet Software Crowding

Hedge Fund Internet Software Crowding by AlphaBetaWorks Charts

Hedge funds tend to pile into the same few stocks. In most sectors these crowded bets underperform. In previous articles we discussed the crowding of hedge fund energy as well as exploration and production bets. Internet software stocks show similar underperformance.

Hedge Fund Internet Software Aggregate

If markets were flat since 2004, the aggregate position-weighted hedge fund internet software portfolio (HF Aggregate) would have lost 25%. This is HF Aggregate’s risk adjust return from security selection (?Return):

Given the compounding of ?Returns and internet software sector returns, the cumulative underperformance is...