Meet five powerful players who move the global investment markets

Knowing what stocks are held by top hedge fund managers is a useful source of investment ideas and an important risk factor for individual investors to consider.

But the data is dated, limited and can be misleading, so investors shouldn’t rely on it too much.

“There is indeed weak — but profitable — information in the holdings data,” said Ted Aronson, founder of investment firm Aronson+Johnson+Ortiz. “As with most stock market information, it is noisy and sloppy, but there is insight to be gleaned.”

Yet even with $20 billion in assets and 38 employees, AJO struggles to gather profitable information from hedge fund holdings, so there’s “not much left for the ‘great unwashed,’” Aronson noted.

Starting point

Despite the limited benefit of such efforts, some of the biggest firms on Wall Street, including Goldman Sachs Group Inc. (GS 156.35, -0.12, -0.08%)  , Bank of America Merrill Lynch (BAC 13.36, -0.01, -0.08%)   and Credit Suisse Group AG (CS 42.69, +0.21, +0.49%)   expend substantial energy tracking hedge fund holdings.

That’s because the hedge fund industry is an influential part of the market. Assets under management are almost $2 trillion, up from $539 billion in 2001, according to Hedge Fund Research Inc.

That amount of money can move markets, so big brokerage firms keep tabs on the top players and what they may be thinking.

Hedge funds often trade a lot too, so they’re an important source of brokerage commissions. That gives them access to some of the best investment ideas Wall Street generates.

For other investors, tracking hedge fund holdings may be a good way to start investigating such valuable ideas.

“It’s not a bad starting point,” said Vladimir Belinsky of Hermitage Advisors Ltd., which advises wealthy people on investments including hedge funds. “If you have 10 top hedge funds owning the same position, it’s got to tell you something. You’re benefitting from all the work and research these firms have done.”

Goldman’s VIP list

Goldman started tracking hedge fund holdings in 2006, at the height of the hedge fund boom. Analysts at the firm currently track almost 700 hedge funds with gross equity assets of $1.2 trillion.

They compile a Hedge Fund Very Important Position, or VIP, list each quarter — a basket of the 50 U.S. stocks appearing most frequently among the top 10 holdings of long/short equity hedge funds.

….view Goldman’s Hedge-Fund VIP List and read more HERE