What is Crowding?

With navigation technology and smartphones, real-time updates provided by other drivers now enable us to avoid traffic jams and pursue alternative routes. Do investors also experience traffic in their investment journey and how do they navigate through?

Crowding is to investing what traffic is to driving.

 

What is Crowding?

Crowding is the tendency of investors to focus on a similar set of strategies or stocks. When too much capital is chasing these securities and ideas, trades can become crowded, potentially increasing volatility and the risk of a liquidity or drawdown event.

Investors may experience different types of crowding depending on the nature of their investment strategies:

 

Occasional but significant drawdown events in the past underscore the need for and potential value of a solution that can alert investors to growing traffic—or crowdedness—in the market. Until now, investors were unable to quickly assess crowding activity and its associated risks.

 

Contact Us

 


Crowding Solutions

Crowding Solution

In the same way that navigation apps facilitate driving, MSCI Crowding solutions provide investors with real-time financial traffic data to enable them to decide whether to avoid crowded thoroughfares. MSCI Crowding lets you know where crowding exists by individual security and factor. Our models can help institutional investors analyze their investments compared to the industry as a whole and make informed decisions based on market concentration.

MSCI Crowding solutions examine crowding from multiple dimensions using a range of metrics resulting in standardized scores that can be utilized to assess crowding exposure. Now investors can quickly identify where crowding risks may be developing—at the security and factor level, and from the hedge fund community—and assess whether adjustments to their exposures are warranted.

Crowding Solutions can be used to:

Monitor for potential bubbles and provide insight into when they may not exist

Evaluate timely information about which securities/factors are crowded

Monitor susceptibility of portfolio to crowding risk

Quickly understand what is and isn’t crowded

Integrate crowding into portfolio positioning


Download Brochure




Security Crowding

Different Dimensions of Crowding

 

Security Crowding

Measures the degree to which a stock has been chased by investors.

Company NameScore
Beam Therapeutics Inc3.52
Applied Molecular Transport Inc3.38
Microstrategy Inc2.99
Cerevel Therapeutics Hldgs Inc2.97
Sabre Corp2.91
Draftkings Inc2.85
Norwegian Cruise Line Holdings Ltd2.83
Upstart Holdings Inc2.79
Airbnb Inc2.78
Lindblad Expeditions Holdings Inc2.71

 

As of May 31, 2021

 

Download Factsheet

 


Factor Crowding

Hedge Fund Crowding

Hedge Fund Crowding

Measures hedge fund positioning and potential crowding around stocks.

 

 

Global equity markets are represented by the MSCI ACWI Investable Market Index (IMI), developed markets by the MSCI World IMI and emerging markets by the MSCI Emerging Markets IMI. North America is represented by the MSCI North America IMI, Europe by the MSCI Europe IMI, Asia-Pacific by the MSCI Pacific IMI and the U.S. by the MSCI USA IMI.

Download Factsheet


Crowding Solutions related content