The fund doesn't compound returns - ie, it is constantly returning money to its investors. So without the AUM, the returns while strong, don't tell you a lot. The annualized figure doesn't tell you much because in the first few years, they could have been thousands of percent on tiny notionals (like 5-10 million) whereas it's a 6Bn fund now, producing more modest returns.
Quant’s winter tail
- Thread starter qlai
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The fund doesn't compound returns - ie, it is constantly returning money to its investors. So without the AUM, the returns while strong, don't tell you a lot. The annualized figure doesn't tell you much because in the first few years, they could have been thousands of percent on tiny notionals (like 5-10 million) whereas it's a 6Bn fund now, producing more modest returns.
That, again, is very easy to find:
https://www.cornell-capital.com/blog/2020/02/medallion-fund-the-ultimate-counterexample.html
The net asset value of Jim Simmons of USD 30 billion is also a quite strong hint of exceptional performance.
Of course you cannot compound at these returns for ever. Otherwise the employees of RT would accumulate the entire wealth of the world.
Now, again, can anybody find the raw returns over the last couple of decades for the AQR flagship fund?
There are tons of funds. What is it's exact name?
From the article which is the starting point of this debate:
"AQR’s Absolute Return strategy — its oldest investment vehicle, which combines a broad array of its investment approaches — returned 16.8 per cent in 2021, and in 2022 it notched up a net gain of 43.5 per cent, its best performance since its inception in 1998. So far this year it is up 19.4 per cent, beating the likes of Citadel, Millennium and DE Shaw."
It is a hedge fund, so I cannot find the returns on Bloomberg. Can anybody find the yearly historical returns going back to inception?
The factor indices depicted in the article do not represent real returns. So I do not put much value on those.
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I'll repeat one more time, there are factor ETFs tracking all of these factors and their returns are pretty fucking transparent. All you need is a Yahoo Finance search.
I would add, however, and I cover quant ans factor investing professionally, a lot of the most popular factor funds are very water down versions of what someone like AQR would do.
For example, look at MTUM, that is by far the biggest momentum fund, but it only rebalances its portfolio twice per year. This goes against all of the academic research that suggests that the momentum factor in particular requires more recent rebalances to capture the premium.
Point is, Just be aware that these funds are more for the quant aware masses than real quant Alpha you would get from someone like AQR.
For example, look at MTUM, that is by far the biggest momentum fund, but it only rebalances its portfolio twice per year. This goes against all of the academic research that suggests that the momentum factor in particular requires more recent rebalances to capture the premium.
Point is, Just be aware that these funds are more for the quant aware masses than real quant Alpha you would get from someone like AQR.
I was not aware that they rebalance so infrequently, thanks for the color. It makes sense in retrospect, since there gonna be so many stocks and every rebalance is gonna be annoying. The portfolio weights are probably also geared for liquidity rather than factor beta. Do you think Bloomberg factor indices are better (are they even tradeable?)?
I don’t know, do you?<squinting> do I know you.