Has AQR beat the market?

M

Maverick2608

Cliff Asness is a billionaire. So obviously he is very successful.

AQR was founded 25 years ago. Today there are 1,000 employees.

AQR successfully convinced institutional investors that value and momentum strategies would beat the market based on academic studies published in academic journals.

However, are investors in AQR funds on average better off today than if they had invested in a passive S&P 500 ETF?

Is the following an unfair proposition?

The investment industry is unique in its ability to foster billionaires selling products that are inferior to what anyone without any education can achieve.
 
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This is probably an apples to oranges comparison. I don't know all the AQR funds, but when I traded fixed income derivatives we were dealing with AQR a lot and their aim was uncorrelated returns. In other words, they wanted to generate returns regardless of what the stock market is doing. If they just wanted to be compared to equities, they probably would have been playing exclusively in equities in a bull market instead of slinging derivatives in a near 0% interest rate environment.
 
countless number of rich portfolio managers out there who can't beat the S&P, let alone their strategy benchmark. I recently spoke to a friend who works at an asset management firm where the fund he is involved with has an annualized return of 1.7% for the past 10 years and this fund has more than $10 billion in client assets.

It's all about who's in bed with who through the old boys network (ie. pension funds)
 
R1234 said:
countless number of rich portfolio managers out there who can't beat the S&P, let alone their strategy benchmark. I recently spoke to a friend who works at an asset management firm where the fund he is involved with has an annualized return of 1.7% for the past 10 years and this fund has more than $10 billion in client assets.

It's all about who's in bed with who through the old boys network (ie. pension funds)
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That's totally fair. Huge hedge funds that made a name making a killing during '08 grew so large that they went from having novel strategies to having a bunch of new Portfolio Managers doing the same strategies. Obviously, what got them there wasn't going to keep them there but nobody on the outside or not on the other end of their trades isn't going to know what's going on.
 
Junky said:
This is probably an apples to oranges comparison. I don't know all the AQR funds, but when I traded fixed income derivatives we were dealing with AQR a lot and their aim was uncorrelated returns. In other words, they wanted to generate returns regardless of what the stock market is doing. If they just wanted to be compared to equities, they probably would have been playing exclusively in equities in a bull market instead of slinging derivatives in a near 0% interest rate environment.
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Agree a neutral long short fund or otherwise uncorrelated fund or low vol fund can deliver below market returns and still achieve its goal. But have AQR done that over a significant period of time? Very low return or no return is of course not good enough irrespective of whether the market return is a good benchmark.

Genuine question as I do not know the answer, but my hunch is no since the value and momentum anomalies seemed to disappear when they became widely known in the beginning of the 90s.
 
need to look at risk adjusted returns. also, correlations to other assets. However, in this industry you don't need to make money to make money :cool:
 
I don't know why people have such a hard time understanding this. Maybe it is because there is not a good analogy to other products in the non-financial space.

AQR is offering products to those who are trying to diversify risk away from the index. There is no point then in comparing the returns to the index. To say the investors would have been better just holding SPY makes no sense when that is exactly what they are trying to not do.

Maybe a bad analogy would be like you grew up poor and sick of eating beans so you diversify to chicken, beef and beans when you have more wealth. Then someone posts a "study" about how you can save money by just eating all beans. Why you wasting your money on chicken and beef? What are you stupid? Just eat all beans! These chicken and beef farmers are all scams if you would just follow the science and read the bean study.

It is missing the point that after a certain amount of wealth the person is no longer just interested in absolute return and absolute wealth maximization.

I am sure there is even an aspect that at some level of wealth, hedge funds are like horses at the track. It is just fun to try to pick the winning horse. At some level of wealth, the real horse track is just not big enough for the action you are looking for.

I am sure at some high society event it is a load of fun to talk shit about a hedge fund you are in that is crushing it at the time. How lame and unsophisticated would look if talking about the returns of SPY in that situation?

Junky said:
This is probably an apples to oranges comparison. I don't know all the AQR funds, but when I traded fixed income derivatives we were dealing with AQR a lot and their aim was uncorrelated returns. In other words, they wanted to generate returns regardless of what the stock market is doing. If they just wanted to be compared to equities, they probably would have been playing exclusively in equities in a bull market instead of slinging derivatives in a near 0% interest rate environment.
More...
 
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