Fund Breakevens (Average Buy Prices)

What is a breakeven?

A fund's breakeven on a stock is its average buy price: what it paid, on average, for each of the shares it holds now. It's the price at which the position neither makes nor loses money.

Funds rarely buy a stock at a single price. They build a position over time, at different prices and in different amounts. Bill Ackman once explained that he'd often buy a stock, watch the price fall, then buy a lot more at the lower price. The breakeven takes all of those trades into account.

If today's price is above a fund's breakeven, the fund is probably in profit on the stock. If it's below, the fund is probably losing money on it (underwater).

How breakevens are calculated

A 13F filing lists what a fund holds at the end of each quarter, but not what it paid. So HedgeFollow estimates the price of every trade, and calculates breakevens differently from other websites. We believe our method gives better estimates, although it comes at a heavy cost.

First, we estimate the price of each quarter's buys and sells using a weighted average of the stock's price during the quarter. Then we take all the buys and sells from a fund's filings, and build up the rolling cost basis of its position, weighting each buy and sell in each quarter.

Finally, when there is data for the current quarter, it comes in too:

• Weighted averages of the trade prices reported on Form 4
• Weighted averages of the prices on the reporting dates of 13G and 13D filings

The result is a breakeven that we believe is the best estimate of a fund's cost basis from the data available.

It's one of the most computationally expensive figures on the site: the process runs over millions of data points (per position, per fund, per date, using all previous positions), and often has to be adjusted again.

Breakevens are estimates

No one knows the exact cost per share except the fund itself, so the best anyone can offer is an estimate. Estimates can sometimes be off for several reasons, including:

• A fund's use of warrants, options, convertibles, etc.
• A fund's use of purchase agreements, OTC deals, etc.
• Reporting errors, and errors carried over from earlier filings

So don't focus on the extreme outliers among breakevens. Look at the big picture, and how they're spread across funds.

Despite not being exact, breakevens are good ballpark estimates in most practical cases. Investors like to compare their own buy prices with institutions', as it gives them a sense of where they stand.

Where you'll see them

• Breakeven & P/L, on fund and stock pages and in the Hedge Fund Tracker: one fund's breakeven on a stock, and its profit or loss at today's price. Some pages still call it the Average Buy Price.
• Median Breakeven, in the Stock Screener, Compare Stocks, the stock lists and the portfolio tools: the breakeven of the median fund holding the stock. Half of the funds paid more for their shares on average, half paid less.
• Funds in Profit vs Underwater: how many of the funds holding the stock have a breakeven below today's price (in profit), and how many above it (underwater).
• Buy Prices, a tab on each stock's page: how the funds' breakevens on the stock compare with today's price.