AQR in 401k

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kmurp
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AQR in 401k

Post by kmurp » Sat Mar 11, 2017 12:46 am

I am one of the trustees of our small company 401k. I believe that we have access to AQR through our platform but we do not currently use any of their funds in our menu. I don't know if the minimum investment available to us is practical either as I've not investigated that. That said, is there an AQR fund that anyone would recommend as an addition to a company fund menu ? One that could provide some benefit by being uncorrelated to the usual stock and bond fund menu? As a fiduciary, I'm both interested and hesitant as I don't want our members to get into trouble with an unpredictable fund.

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Noobvestor
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Re: AQR in 401k

Post by Noobvestor » Sat Mar 11, 2017 2:34 am

kmurp wrote:I am one of the trustees of our small company 401k. I believe that we have access to AQR through our platform but we do not currently use any of their funds in our menu. I don't know if the minimum investment available to us is practical either as I've not investigated that. That said, is there an AQR fund that anyone would recommend as an addition to a company fund menu ? One that could provide some benefit by being uncorrelated to the usual stock and bond fund menu? As a fiduciary, I'm both interested and hesitant as I don't want our members to get into trouble with an unpredictable fund.
Googles AQR real quick. OK, they use a series of stock photos on their front page of smiling happy people. Not exactly encouraging. Checks Morningstar for some more info. OK, they have a bunch of fancy-sounding funds, like: AQR Emerging Multi-Style, with an ER of .75%.

I'm going to go out on a limb here and say no, you're not adding any benefits by adding these funds beyond a nice cheap and broad-market array of Total Stock, Total International and Total Bond through Vanguard or similar. If anything, you'll lead people to 'diversify' into things that actually overlap core funds but cost them more and could easily return far less over time.
"In the absence of clarity, diversification is the only logical strategy" -= Larry Swedroe

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tarheel
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Re: AQR in 401k

Post by tarheel » Sat Mar 11, 2017 6:00 am

There are many of us who invest heavily with AQR. It all comes down to whether you understand the value they provide.

kmurp
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Re: AQR in 401k

Post by kmurp » Sat Mar 11, 2017 7:17 am

tarheel wrote:There are many of us who invest heavily with AQR. It all comes down to whether you understand the value they provide.
Which I don't really. Which is why I'm asking. I'm just looking for a non correlated asset category that wouldn't violate my fiduciary responsibility and would add value to our participants. We do already have total stock, bond and international admiral shares.

ZenInvestor
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Re: AQR in 401k

Post by ZenInvestor » Sat Mar 11, 2017 7:26 am

kmurp wrote:
tarheel wrote:There are many of us who invest heavily with AQR. It all comes down to whether you understand the value they provide.
Which I don't really. Which is why I'm asking. I'm just looking for a non correlated asset category that wouldn't violate my fiduciary responsibility and would add value to our participants. We do already have total stock, bond and international admiral shares.
ARQ are factor investing funds largely based on the Fama French research that size, value, and beta (now also momentum) predict portfolio returns. There is sufficient academic and market performance evidence to support this. Some would argue that the total market, by definition beta, lacks in real diversification because it is market weighted... that being diversified across factors gives more diversification and improved risk adjusted returns net of costs. Larry Sweedrow is a good author to follow on this.

The question of should they be included is to me a question of trusting people to make choices with their own money that are right for them vs big brother hand holding them

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