How Passive Are Hedge Funds And What Do They Invest In?

The quarterly Hedge Fund Tracker (HFT) report provides our clients with a holistic view of what the biggest pure-play hedge funds are buying and selling. Our clients believe that our three part selection criterion for the HFT provide valuable insights and even give transparency to the market. Therefore, we wanted to explain in more detail our selection criterion and show some real world examples of the three step processes.

1. The first step is the simplest step. We look at SEC 13F filings* to determine the largest hedge funds based on reported Equity Assets Under Management (EAUM).

  • By looking at 13Fs we only focus on long equity positions. This allows consistent apples-to-apples comparisons of EAUM. The alternative would be to look at all Assets Under Management (AUM) and pick the top ten largest hedge funds to analyze their holdings. This however, would provide inconsistent comparisons because the level of disclosures is different across funds.  For example, publicly listed hedge funds such as Och-Ziff Capital Management disclose more asset types private-family offices like Icahn Capital.

2. The second step is further analysis to isolate the universe of what S&P Capital IQ believes are pure-play hedge funds that focus on stock picks.

  • This step is probably one of the most interesting steps as it requires filtering out what we call ‘supermarket’ hedge funds to be left with pure-play hedge funds. Supermarket hedge funds invest in pooled vehicles and other passive investments like ETFs. This filtering process leaves us with hedge funds that generally focus on single stocks.
  • For example of some of the passive hedge funds we focused on have heavy exposures to ETFs. Of the 1,681 US hedge funds in our database, 271 or 16% have positions in ETFs. Of these 271 hedge funds, 30 or 1.8%, have their entire portfolio invested in ETFs. Table 1 shows an abbreviated list of  hedge funds whose portfolios consist of ETFs.  

Hedge Funds with Entire Portfolios in ETFs

To find out more on how ETF strategies are used by hedge funds read the research produced by Todd Rosenbluth, S&P Capital IQ’s Senior Director of ETF Fund Research here.  

3. Finally, in the third step we select the hedge funds that have 100 or less positions in order to focus on the biggest bets and overweight positions.

  • Hedge funds with a large number of positions (e.g., over 100) may include asset classes other than equities.  Focusing on net long positions as reported by hedge funds provides a better understanding of the sectors and stocks in which these more active funds are making investments. 

To read the latest findings from the Hedge Fund Tracker, and find out why Healthcare is in favor and InfoTech is out of favor, go to the full report.


Form 13F Reports are required to be filed within 45 days of the end of a calendar quarter by institutional investment managers with the U.S. Securities and Exchange Commission (SEC).  An institutional investment manager is an entity that  invests in, buys or sells securities for its own account, or a natural person or entity that exercises investment discretion over the account of any other natural person or entity. Only securities on the 13F list provided quarterly by the SEC (13F Securities) are required to be included in Form 13F Reports. Therefore, Form 13F Reports may not reflect the most current holdings of institutional investment managers because it is required that the 13F Report include only 13F Securities, is filed on a lag, and some funds may not meet the filing thresholds or other requirements. In addition, because the 13F Reports are as of the last date of the quarter, the 13F Report may not describe intra-quarter activity.

Subscribe to Insights