Download Short Selling Intelligence

Short Selling Intelligence:
How to Generate Alpha and Mitigate Risk for Investment Managers
Charlotte Wall, Managing Director, Data Explorers
2009 FactSet Investment Process Symposium
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Introduction: Short Selling and Securities Lending
Introduction: Short Selling and Securities Lending
Part 1: Opening the Short
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Sh t Sale
Short
S l (Open)
(O
)
Lender (Long Holder)
Sec Lending (Loan)
Lending Fee
&
Collateral
Short Seller (Sell)
Settlement
Market Price Buyer (Long or Buy to Cover)
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Introduction: Short Selling and Securities Lending
Introduction: Short Selling and Securities Lending
Part 2: Buy to Cover
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B tto C
Buy
Cover (Cl
(Close))
Lender (Long Holder)
Collateral
Sec Lending
(Return)
Short Seller (Buy to Close)
Market Price
Settlement Seller (Long or Short Sell)
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Introduction: Where does Securities Lending Data Come From?
Come From?
Global market participants provide securities lending data to Data Explorers in return for market transparency, benchmarking and risk analytics
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Borrowers
Lenders
Prime Brokers
Hedge Funds
Asset managers
Global Custodians
Pension Funds
Mutual Funds
Stock Loan Data
Stock Loan Data
Market Transparency,
Benchmarking
and
Risk Analytics
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Introduction: Short Selling Data ‐ Why is it Important?
Short Selling – Opaque Market
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Lack of information available on a timely basis
Lack of information available on a timely basis
Alpha
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Idea Generation ‘Dog that Didn’t Bark’ – something that does not happen is as important as something that does.
R t l l
Rental value of long securities
fl
iti
Risk `
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How bearish are short sellers in securities I own or am thinking How
bearish are short sellers in securities I own or am thinking
of investing in – is it a ‘crowded short’ and how has the short base changed?
Stock Screening: Upcoming Earnings
Stock Screening: Upcoming Earnings
Source: FactSet Research Systems Inc.
¾Earnings in the next week
¾Earnings
in the next week
¾Market Cap > $500mm
¾Pct Shares Outstanding on Loan > 10%
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Portfolio Index Review: DESLI Global 50
Portfolio Index Review: DESLI Global 50
Source: FactSet Research Systems Inc.
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Example: Total S.A.
Example: Total S.A.
Source: FactSet Research Systems Inc.
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Example: Volkswagen
Example: Volkswagen Source: FactSet Research Systems Inc.
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Rights Issue Example: Danone S.A. (Demand)
Rights Issue Example: Danone S.A. (Demand)
Source: FactSet Research Systems Inc.
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Rights Issue Example: Danone S.A. (Supply)
Rights Issue Example: Danone S.A. (Supply)
Source: FactSet Research Systems Inc.
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Rights Issue Example: Taylor Wimpy (Demand)
Rights Issue Example: Taylor Wimpy (Demand)
Source: FactSet Research Systems Inc.
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Rights Issue Example: Taylor Wimpy (Supply)
Rights Issue Example: Taylor Wimpy (Supply)
Source: FactSet Research Systems Inc.
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Single Name: Citigroup
Single Name: Citigroup
Source: FactSet Research Systems Inc.
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Single Name: Moody’ss Corp
Single Name: Moody
Corp
Source: FactSet Research Systems Inc.
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Single Name: Strayer Educational
Single Name: Strayer Educational
Source: FactSet Research Systems Inc.
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Conclusion
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Short selling and securities lending data historically has not been widely used or understood
not been widely used or understood
Market turmoil has placed more focus on the short market
Data Explorers makes it easier to add short data to the investment manager’s decisions making toolkit
Do you want to be an ‘early adopter’?
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Q ti ?
Questions?
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