NAAIM Survey Shows Active Managers Still Running With The Bulls
May 18, 2011Headline Alert
Sentiment Update: NAAIM Survey of Active Managers
The National Association of Active Investment Managers (NAAIM) member firms who are “active money managers” are asked each week to provide a number which represents their overall equity exposure at the market close on a specific day of the week, currently Wednesdays. Responses can vary from +200% long to -200% short. Responses are tallied and averaged to provide the average long (or short) position or all NAAIM managers, as a group.
The NAAIM Member Exposure Average is a two-week moving average of member firms’ responses to the weekly survey as of the previous Wednesday.
Current NAAIM Member Exposure Average: +74.66% (from +75.31% last week)
Our analysis of the data shows this to be a Bullish reading relative to those seen over the past year.
For reference purposes, the recent high water mark of the smoothed average has been 86.28% (2/9/2011) while the low was 13.47% on 7/7/2010.
Last Quarter’s Average Exposure: 66.99% (Q3: 54.04%)
Why should you care about this data? According the originator of the survey and past NAAIM President William Hepburn, “NAAIM advisors absolutely nailed the 2008 decline by steadily reducing equity allocations beginning in late 2007.” Hepburn goes on to note, “NAAIM members had an average equity exposure of only 19% from June 2008 through March 2009.”
Although the survey is less than five years old, Ned Davis Research notes that when the NAAIM Survey is above 73% (which occurs approximately 23% of the time), the S&P 500 has lost ground at an annualized rate of -7.6% per year. This is likely due to the fact that by the time the survey sports a high reading; most managers have already established long positions.
When the survey reading is between 14% and 73%, the S&P has gained +1.1% per year (approximately 70% of the time). And when the survey reading is below 14% the S&P has gained at a rate of +28.7% (again, a low reading suggests that managers have already sold). This reading has only occurred 7% of the time.
S&P 500 - Last 12 Months
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