Form 13F Filings “Tell-All”


Section 13(f) of the Securities and Exchange Act was passed by Congress in 1975 in order to provide the public with information regarding the securities holdings of major institutional investors. The reasoning behind this move was that greater disclosure as to the investments of institutional investors “would increase investor confidence in the integrity of the United State securities markets” (Source: SEC website). The disclosures are made by way of Form 13F filings, which are due to be filed quarterly within 45 days of the end of a quarter. What they actually disclose provides some interesting insight into the workings — and thinking — of institutional investor managers.

Use of Interstate Commerce

As to who needs to file Form 13F, the SEC explains: “Institutional investment managers that use the United States mail (or other means or instrumentality of interstate commerce) in the course of their business and that exercise investment discretion over $100 million or more in Section 13(f) securities must file Form 13F.” It is curious as to the wording of “that use the United States mail (or other means or instrumentality of interstate commerce) in the course of their business” since in reality there is not an institutional investment manager who does not utilize such means of interstate commerce given the fact that the Internet is deemed to be just such an instrumentality.

Institutional Investment Managers

The manager under discussion in Section 13(f) is a business entity or individual that invests in or buys and sells securities for its own account. Banks, insurance companies and brokers are examples of such entities as are corporations and pension funds that manage their own portfolios. But the secondary definition requires the element of “exercising investment discretion” over the account of any other natural person or entity. In this case, the trust department of a bank meets the criteria as does an investment adviser who manages mutual funds, pension plan assets or private accounts.

Not just managers overseeing the threshold amount in the private sector must file Form 13F but also a person who exercises investment discretion over a state or municipal pension fund must comply since that individual also meets the definition of an institutional investment manager. “Person” within the meaning of the act includes “a natural person, company, government, or political subdivision, agency, or instrumentality of a government” (See Section 3(a)(9) of the Securities Exchange Act (defining “person”) and SEC Release No. 15292 (Nov. 2, 1978).

A quick glance at the 2014 Q2 Form 13F filings of some of the biggest hedge fund managers reveals that they are still bullish on technology and health care, and that most of them invest in the same stocks!