"Do Institutional Investors Have an Ace up Their Sleeves?—Evidence from Confidential Filings of Portfolio Holdings"
Publication type: Working paper
This paper studies the holdings by institutional investors that are filed with a significant delay through amendments to Form 13F and that are not included in the standard 13F holdings databases (the "confidential holdings)". We find that asset management firms (hedge funds and investment companies/advisors) in general, and institutions that actively manage large and risky portfolios in particular, are more likely to seek confidentiality. The confidential holdings are disproportionately associated with information-sensitive events such as mergers and acquisitions, and include stocks subjected to greater information asymmetry. Moreover, the confidential holdings of asset management firms exhibit superior risk-adjusted performance up to four months after the quarter end, suggesting that these institutions may possess short-lived information. Our study highlights the tension between the regulators, public, and investment managers regarding the ownership disclosure, provides new evidence in the cross-sectional differences in the performance of institutional investors, and highlights the limitations of the standard 13F holdings databases.
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