What is the SEC Form 13F

SEC Form 13F is a quarterly report that is filed by institutional investment managers with at least $100 million in equity assets under management, discloses their U.S. equity holdings to the Securities and Exchange Commission (SEC) and provides insights into what the smart money is doing. Firms that are required to file 13Fs include mutual funds, hedge funds, trust companies, pension funds, insurance companies and registered investment advisers.


SEC Form 13F filings provide investors with an inside look at the holdings of Wall Street's top stock pickers and their asset allocation strategies. Individual investors and other institutional investors, who want to replicate the strategies of rock star hedge fund managers like Daniel Loeb, David Tepper, David Einhorn, Carl Icahn or Seth Klarman, scrutinize 13F filings to generate investment ideas. And the financial press often reports on what these fund managers have been buying and selling. By looking at the top holdings of some managers, investors hope to put together a best-ideas portfolio without paying management fees.

However, the risk for both professional and retail investors, is that the tendency of hedge funds to borrow investment ideas from each other, and the bandwagon effect, can lead to crowded trades and overvalued stocks. Hedge fund managers are no more immune to behavioral biases like herd behavior, than anyone else. After all, if you are a fund manager, it is safer to be wrong with the majority than to be right alone.

13Fs Only Tell Half The Story

13F reports only require funds to report their long positions, in addition to their put and call options, American Depositary Receipts (ADRs), and convertible notes. But hedge funds also purchase bonds and foreign equities, and sell stocks short. This can give a misleading picture, as some funds generate most of their returns from their short selling, only using long positions as hedges. Also, 13Fs only track investments made on domestic exchanges.

Unreliable and Backward Looking

13F filings are not necessarily reliable – as the SEC itself admits — because no one at the SEC analyzes the content for accuracy and completeness. So, investors should take them with a pinch of salt. After all, the infamous fraudster Bernard Madoff also filed 13F forms on a quarterly basis.

Another major issue with 13F reports is that they are filed up to 45 days after the end of a quarter. And most managers submit their 13Fs as late as possible, because they do not want to tip off rivals about what they are doing. So, by the time other investors get their hands on them, they are looking at stock purchases that may have been made more than four months prior to the filing. Seeing how professional fund managers have been investing in the previous few months can be insightful, but it is backward looking. If the smart money is already fully invested in a stock, retail investors are likely to be late to the party by the time they learn about it.