Did Hedge Funds Drop The Ball On Hamilton Lane Incorporated (HLNE)?

Concerns over rising interest rates and expected further rate increases have hit several stocks hard during the fourth quarter. NASDAQ and Russell 2000 indices were already in correction territory. More importantly, Russell 2000 ETF (IWM) underperformed the larger S&P 500 ETF (SPY) by nearly 7 percentage points in the fourth quarter. Hedge funds and institutional investors tracked by Insider Monkey usually invest a disproportionate amount of their portfolios in smaller cap stocks. We have been receiving indications that hedge funds were paring back their overall exposure and this is one of the factors behind the recent movements in major indices. In this article, we will take a closer look at hedge fund sentiment towards Hamilton Lane Incorporated (NASDAQ:HLNE).

Hamilton Lane Incorporated (NASDAQ:HLNE) investors should be aware of a decrease in hedge fund interest lately. HLNE was in 9 hedge funds’ portfolios at the end of the fourth quarter of 2018. There were 12 hedge funds in our database with HLNE holdings at the end of the previous quarter. Our calculations also showed that hlne isn’t among the 30 most popular stocks among hedge funds.

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 32 percentage points since May 2014 through March 12, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.5% through March 12, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Chuck Royce

We’re going to review the latest hedge fund action encompassing Hamilton Lane Incorporated (NASDAQ:HLNE).

How are hedge funds trading Hamilton Lane Incorporated (NASDAQ:HLNE)?

Heading into the first quarter of 2019, a total of 9 of the hedge funds tracked by Insider Monkey were long this stock, a change of -25% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards HLNE over the last 14 quarters. With the smart money’s capital changing hands, there exists a select group of noteworthy hedge fund managers who were increasing their stakes considerably (or already accumulated large positions).

No of Hedge Funds with HLNE Positions

The largest stake in Hamilton Lane Incorporated (NASDAQ:HLNE) was held by Renaissance Technologies, which reported holding $29.9 million worth of stock at the end of December. It was followed by Royce & Associates with a $3.2 million position. Other investors bullish on the company included Laurion Capital Management, Two Sigma Advisors, and D E Shaw.

Seeing as Hamilton Lane Incorporated (NASDAQ:HLNE) has experienced declining sentiment from the entirety of the hedge funds we track, it’s safe to say that there lies a certain “tier” of hedgies who were dropping their positions entirely by the end of the third quarter. Interestingly, Martin Hughes’s Toscafund Asset Management said goodbye to the largest position of the “upper crust” of funds watched by Insider Monkey, totaling an estimated $7.5 million in stock, and Jeffrey Hoffner’s Engle Capital was right behind this move, as the fund sold off about $5.2 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest fell by 3 funds by the end of the third quarter.

Let’s now review hedge fund activity in other stocks similar to Hamilton Lane Incorporated (NASDAQ:HLNE). We will take a look at Grupo Aeroportuario del Centro Norte, S. A. B. de C. V. (NASDAQ:OMAB), Washington Real Estate Investment Trust (NYSE:WRE), NetScout Systems, Inc. (NASDAQ:NTCT), and Pattern Energy Group Inc (NASDAQ:PEGI). This group of stocks’ market values match HLNE’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
OMAB 5 28844 0
WRE 14 95773 6
NTCT 14 92846 2
PEGI 11 18611 2
Average 11 59019 2.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 11 hedge funds with bullish positions and the average amount invested in these stocks was $59 million. That figure was $41 million in HLNE’s case. Washington Real Estate Investment Trust (NYSE:WRE) is the most popular stock in this table. On the other hand Grupo Aeroportuario del Centro Norte, S. A. B. de C. V. (NASDAQ:OMAB) is the least popular one with only 5 bullish hedge fund positions. Hamilton Lane Incorporated (NASDAQ:HLNE) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. A small number of hedge funds were also right about betting on HLNE as the stock returned 29.6% and outperformed the market by an even larger margin.

Disclosure: None. This article was originally published at Insider Monkey.