New York (HedgeCo.Net) In preparation for the mid-year and second quarter report card for the sectors and for the HedgeCoVest models which we will produce next week, we started looking at some of the sector information and how our composite models have stacked up so far this year. What we found is that the professional managers that manage the models on our platform are doing exactly what we expect them to do. Achieve alpha through active management.
Looking at the data through June 22 on a YTD basis as well as on a quarter-to-date basis, there were several composite models that stood out. Sure the HedgeCoVest Biotechnology Long-Only model is outperforming both the Biotech iShares ETF (Nasdaq: IBB) and the Market Vectors Biotech ETF (NYSE: BBH) by a few percentage points on a YTD basis, but it was a couple of the other models that stood out.
First, from a YTD and a QTD standpoint, only two of the Select Sector SPDR ETFs that represent the ten main sectors are in negative territory—Energy and Utilities. We combined these two sectors together in the HedgeCoVest Energy and Utilities Long-Only model and the HedgeCoVest Energy and Utilities Long/Short model.
The Energy Select Sector SPDR (NYSE: XLE) was down 1.62% YTD through June 22 and on a QTD basis it was down 0.3%. The Utilities Select Sector SPDR (NYSE: XLU) was down 7.97% YTD and 2.95% QTD as of the same date. However, through professional active management, the HedgeCoVest Energy and Utilities Long-Only model is up 0.02% YTD and 4.43% QTD while the HedgeCoVest Energy and Utilities Long/Short model is up 0.96% YTD and 3.3% QTD.
These two models aren’t the only ones providing alpha to investors either. The HedgeCoVest Technology Long-Only model has gained 6.58% YTD and 4.27% QTD, while the non-actively managed Technology Select Sector SPDR (NYSE: XLK) is up 4.62% YTD and 3.96% QTD.
These numbers show two things: active management can produce alpha, and secondly the managers on the HedgeCoVest platform are good. To borrow from the PGA’s current ad campaign slogan—these guys are good (apologies to the female managers).
From a marketing standpoint, it might be more exciting and easier to point out that the HedgeCoVest Biotechnology Long-Only model is up over 28%, but the sector is up a great deal as well. Yes the managers on the platform have produced alpha in the biotech model as well, but the better performance may be with the Energy and Utilities models and the Technology model because those sectors are either down or at the very least they have been volatile. And yet the models have produced gains rather than losses and they have produced greater gains in the sector that has been up.
Rick Pendergraft
Research Analyst
HedgeCoVest
