AQR Capital

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AQR Capital Management
Limited liability corporation
IndustryInvestment management
FoundedJanuary 1998; 21 years ago (1998-01)
Headquarters,
Area served
Worldwide
Key people
Cliff Asness (Founding & Managing Principal)
David Kabiller, CFA
(Founding Principal)
John Liew
(Founding Principal)
AUM$226 billion (as of Q3, 2018)[1]
Number of employees
1,000[1]
Websitewww.aqr.com

AQR Capital Management (Applied Quantitative Research) is a global investment management firm based in Greenwich, Connecticut, United States. The firm, which was founded in 1998 by Cliff Asness, David Kabiller, John Liew and Robert Krail, offers a variety of quantitatively driven alternative and traditional investment vehicles to both institutional clients and financial advisors. The firm is primarily owned by its founders and principals. AQR has additional offices in Boston, Chicago, Los Angeles, Bangalore, Hong Kong, London, Sydney, and Tokyo.[2]

Investment philosophy and strategies[edit]

AQR employs a research-based “systematic and consistent approach” to portfolio construction.[3] This disciplined approach of identifying long-term, repeatable sources of return means “having a high conviction in the process, but not a high conviction in any particular stock.”[3] The firm is a strong proponent of diversification within portfolios, as well as adding strategies with low correlation to traditional asset classes as a complement to existing portfolios.[4]

AQR was an early adopter of style,[5] or factor, investing given the strategy’s academic roots. Although the four styles — value, momentum, defensive and carry[6] — have been well-known and used in quantitative investing for decades, AQR has long advocated for using these styles together, citing their diversifying qualities.

AQR is perhaps best known for its alternative investment strategies, which aim to offer low correlation to traditional, equity-dominated portfolios. AQR was one of the first investment managers to offer a risk parity strategy, which aims to balance allocations based on underlying risk rather than asset classes. The firm also offers managed futures, a trend-following strategy that is “uncorrelated with other asset classes” and supported by over a century of academic evidence.[3]

AQR was one of the first investment management firms to offer alternative mutual funds, launching its family of mutual funds in 2009.[7] The firm’s liquid alternative strategies were a “category leader” in Morningstar’s ranking for 2015.[8]

History[edit]

Three of AQR’s founding principals — Cliff Asness, Robert Krail and John Liew — met in the University of Chicago’s PhD program, where the foundation of the firm’s investment philosophy took shape.[9]

While still working on his dissertation, which focused on momentum and value, Asness joined Goldman Sachs, where he was asked to lead a new quantitative research team within the firm’s asset management division.[10] Liew and Krail joined him, and the new team applied what they learned in academia to manage both hedge-fund and long-only assets.[9]

In 1998, Asness, David Kabiller, Krail and Liew left Goldman Sachs to establish AQR.[10]

AQR was among the first hedge fund managers to voluntarily register at its inception with the Securities and Exchange Commission. The firm’s first product was a hedge fund, though it soon (2000) entered into traditional portfolio management. In 2001, AQR had nearly $750 million assets under management.[11] In 2004, AQR had $12 billion assets under management. The firm opened its first international office in Australia in 2005.[12]

In 2009, AQR became one of the first investment managers to offer alternative mutual funds.[9] In 2011, the firm opened an office in the UK.[13]

As of Q3 2018, the firm had $226 billion in assets under management.[1] After disappointing results in 2018, AQR announced job cuts in January 2019.[1]

Assets under management[edit]

Year AUM in Bil.
USD$
2009[5] 20
2015[3] 23
2018[1] 226

Ties to academia[edit]

As of 2016, approximately half of the AQR’s employees have earned advanced degrees, with 52 holding PhDs.[14]

In 2015, AQR established QUANTA Academy, the firm's learning and development program, which is focused on three core pillars: Technical Skills and Knowledge, Leadership and Management, and Personal Enrichment. With a focus on lifelong learning, the program is designed to help employees reach their full potential through hundreds of courses annually.[15]

AQR’s Insight Award (see below for winners), which “recognizes the most significant and innovative academic research that offers practical applications for investors,” awarded its fifth annual slate of winners in 2016.[16]

In 2014, AQR partnered with the London Business School to establish The AQR Asset Management Institute, which focuses on asset management research and thought leadership. The Institute rewards scholars in the field with annual grants and prizes.[17] AQR donated more than $15 million to be spread out over ten years.[18][19]

The firm is also a sponsor of the AQR Top Finance Graduate Award at Copenhagen Business School, which honors the PhD graduates whose research carries the greatest potential impact.[20]

AQR Insight Award[edit]

AQR awards a $100,000 annual prize, the AQR Insight Award “to encourage and acknowledge academics whose research promises to be of significant use to institutional investors.”

  • 2012 Winners: Bryan Kelly and Seth Pruitt[21]
  • 2013 Winners: Martin Lettau, Michael Weber, and Matteo Maggiori[22]
  • 2014 Winners: Eric Budish, Peter Cramton, and John J. Shim[23]
  • 2015 Co-Winners: Robert Ready, Nikolai Roussanov and Colin Ward / Christopher L. Culp, Yoshio Nozawa and Pietro Veronesi[24]
  • 2016 Co-Winners: Samuel M. Hartzmark and Kelly Shue / Darrell Duffie and Haoxiang Zhu
  • 2017 Winners: Wenxin Du, Alexander Tepper and Adrien Verdelhan
  • 2018 Co-Winners: Matteo Maggiori, Brent Neiman and Jesse Schreger / Guanhao Feng, Stefano Giglio and Dacheng Xiu[25]

References[edit]

  1. ^ a b c d e Wigglesworth, Robin (8 January 2019). "AQR announces job cuts after disappointing 2018". New York, N.Y., United States: Financial Times. Nikkei. Retrieved 26 March 2019.
  2. ^ "Office Locations". www.aqr.com. Retrieved 2019-03-01.
  3. ^ a b c d Bary, Andrew (27 February 2016). "How AQR's Liquid Alternative Funds Are Outperforming Competitors" Barron's". United States: Barron's. Dow Jones & Company Inc. Retrieved 3 June 2016.
  4. ^ "DailyAlts Staff (October 18, 2014) "Video: Cliff Asness Says Market Volatility is a Good Reason to Diversify" Daily Alts". Retrieved 2016-06-03.
  5. ^ a b Bary, Andrew (31 August 2009). "Preaching the Gospel of Momentum" (Interview). United States: Barron's. Dow Jones & Company Inc. Retrieved 5 March 2019.
  6. ^ "AQR Capital launches first quantitative bond fund". Financial Times. 2018-04-05. Retrieved 2019-03-05.
  7. ^ "Stein, Charles (January 14, 2016) "Cliff Asness's Alternative Funds Top Rivals With 17% Returns" Bloomberg LP". Retrieved 2016-06-03.
  8. ^ "Morningstar (January 7, 2016) "The Year in Alternative Funds" Morningstar.com". Retrieved 2016-06-03.
  9. ^ a b c "Who We Are – Our History". Retrieved 2016-06-03.
  10. ^ a b "Lindsey, Richard & Schachter, Barry (2007) "How I Became a Quant" John Wiley & Sons, Inc". Retrieved 2016-06-03.
  11. ^ Journal, Ken Brown Staff Reporter of The Wall Street. "Hedge Funds Start to Lose Their Fast-Growing Mystique". WSJ. Retrieved 2019-03-02.
  12. ^ "Our Firm". www.aqr.com. Retrieved 2019-03-11.
  13. ^ "Our Firm". www.aqr.com. Retrieved 2019-03-26.
  14. ^ ""Who We Are – Academic Engagement" AQR". Retrieved 2016-06-03.
  15. ^ AQR.com
  16. ^ "Burr, Barry (May 13, 2016) "AQR honors 2 groups of academics for annual Insight Award" Pensions & Investments". Retrieved 2016-06-03.
  17. ^ ""AQR Asset Management Institute" London Business School". Retrieved 2016-06-03.
  18. ^ "AQR gives London Business School £10m to build 'Davos of finance'". Financial Times. Retrieved 2019-02-12.
  19. ^ Team, Author: ValueWalk (2015-01-05). "Hedge Fund AQR Donates $15M To London Business School". ValueWalk. Retrieved 2019-02-12.
  20. ^ ""AQR Top Finance Graduate Award at CBS" Copenhagen Business School". Retrieved 2016-06-03.
  21. ^ "New research wins first annual AQR Insight award". Reuters. Retrieved 2013-11-25.
  22. ^ "Market return research wins 2013 AQR Insight Award". Retrieved 2013-11-25.
  23. ^ "Business Wire". Retrieved 2015-06-08.
  24. ^ "Business Wire". Retrieved 2015-06-08.
  25. ^ "AQR Insight Award 2018". www.aqr.com. Retrieved 2019-02-16.

External links[edit]