QSPIX Nightmare - Closed Off to Retail Investors

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tarheel
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QSPIX Nightmare - Closed Off to Retail Investors

Post by tarheel » Fri Oct 09, 2015 8:44 am

Well, I'm guessing the QSPIX threads are going to start to disappear now.....

I've been auto-investing in QSPIX in my Fidelity 401(k). Recently, I switched all of my new contributions to QEELX (emerging markets) since I was outside of my rebalancing bands......

Today I go back in to reset to my standard allocation, which has a contribution to QSPIX. NO DICE. :annoyed

QSPIX IS NOW CLOSED TO RETAIL INVESTORS THROUGH FIDELITY. No more purchasing QSPIX whatsoever without an advisor, with the high minimum purchase (5M?) now in effect, it seems.

Not only is this extremely frustrating as far as QSPIX goes, I am also very concerned that AQR will pull their other equity funds at some point. Of which I own QCELX, QSMLX, QICLX, and QEELX.

AQR has just lost a huge amount of my trust. Which is a problem since they hold about 60% or so of my retirement portfolio.

Since long term my allocation in QSPIX will become less and less significant with no possibility of more contributions, I'm probably going to just cut bait now and come up with a new allocation.

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matjen
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Re: QSPIX Nightmare - Closed Off to Retail Investors

Post by matjen » Fri Oct 09, 2015 9:07 am

PM sent tarheel.
A man is rich in proportion to the number of things he can afford to let alone.

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Re: QSPIX Nightmare - Closed Off to Retail Investors

Post by pshonore » Fri Oct 09, 2015 9:09 am

Remember you can also buy QSPNX which is exactly the same fund with a .25 higher ER, and no purchase fee.

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tarheel
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Re: QSPIX Nightmare - Closed Off to Retail Investors

Post by tarheel » Fri Oct 09, 2015 9:21 am

Thanks pshonore......

That's probably going to have to be my road to take. Appears that I can do so in my account.

Basically, I will be paying an extra 25 bps on top of what I pay now (1.5% ---> 1.75%) for the honor of investing in the QSPIX/QSPNX space. :annoyed

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Re: QSPIX Nightmare - Closed Off to Retail Investors

Post by Lafder » Fri Oct 09, 2015 9:23 am

Do you really have no lower cost options ? Those ERs suck.
Lafder

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tarheel
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Re: QSPIX Nightmare - Closed Off to Retail Investors

Post by tarheel » Fri Oct 09, 2015 9:34 am

Ah, well that's a different question. There are about 1,000 posts on the topic. I happen to think they are worth it.

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Re: QSPIX Nightmare - Closed Off to Retail Investors

Post by lack_ey » Fri Oct 09, 2015 9:43 am

FWIW there is a $50 transaction fee on I shares anyway at Fidelity. Depending on the amount and holding time, 25 bp extra on the balance isn't all that much worse or could be better, depending.

There is also the equity market neutral fund (QMNIX, QMNNX), which does much of the same things but just in stocks. It is overall less net leveraged and slightly cheaper but of course loses the exposures in the other asset classes. And also the low-volatility version of the style premia fund (QSLIX, QSLNX).

The lower minimums in IRAs at Fidelity (but not at some others) are kind of unusual in the first place. I'd have expected this stuff was only really available through institutional platforms, say through an adviser. Or for people who actually meet the $1M, $5M minimums, whoever they are.


For context:
Lafder wrote:Do you really have no lower cost options ? Those ERs suck.
Lafder
It's a leveraged long/short (multi)factor fund. i.e. buy some stocks, short some others, go long some bond futures while short others, same for commodities, currencies, you name it. All to gain factor (style) exposure of value, momentum, carry, defensive (low vol).

Funds in the multialternatives space tend to be expensive. The hope is to generate positive returns uncorrelated to stocks and bonds (and commodities). Seeing as this can't be done through normal means and through cheap exposure to actual asset classes, and the capacity of such strategies is limited, some argue that potential benefits might be worth both the risks and the very high fees. With this fund in particular, the returns are generated (if they happen) through factor exposure. The level and degree of exposure per dollar invested is much higher than for long-only funds. If these things stand to make money, the fund may be able to capture some of it and make money. Of course even the hardcore adherents know and admit factors don't work all the time.

Many don't like factor investing to begin with, others don't think the alleged benefits are worth the risks, others prefer different factors, others prefer different ways to get some of the same factor exposures that may be cheaper, and so on.

Info:
viewtopic.php?f=10&t=167241
http://www.advisorperspectives.com/arti ... with-style
http://www.mutualfundobserver.com/2015/ ... mber-2015/
https://www.aqr.com/~/media/files/paper ... -style.pdf

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Re: QSPIX Nightmare - Closed Off to Retail Investors

Post by leonard » Fri Oct 09, 2015 11:36 am

1.5% ER? They did you a favor.
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Re: QSPIX Nightmare - Closed Off to Retail Investors

Post by grap0013 » Fri Oct 09, 2015 2:18 pm

tarheel,

That does suck but I do not think it's a deal breaker for the strategy yet at this price. I'd go with QSPNX.

Go back and follow that link with the Arizona retirement system presentation. Check out page 94. Each incremental 10% increase in QSPIX added 70 basis points in return. The math works with this due to low correlations to which the fund has so far demonstrated to be able to achieve in vivo. Look at it this way. A 10% allocation to QSPIX ER 150 basis points is -15 basis points from 70 expected = +55 basis points net vs. a 10% allocation to QSPNX is -17.5 basis points from 70 basis points = +52.5 basis points net.

We are talking about a 2.5 basis point difference here with a 10% allocation and if the fund holds true to its billing it can still produce a net positive result despite the fees. Just remember to look at the portfolio as a whole rather the pieces.

I have $0.04 in my Fido brokerage account and I tried buying some QSPIX and I got the reject too. Did you try calling Fido like the error message stated? QSPNX may have to be my future purchases as well. My other AQR holdings QSMLX and QEELX are still fair game as usual. Maybe QSPIX was growing in assets too fast?
There are no guarantees, only probabilities.

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Re: QSPIX Nightmare - Closed Off to Retail Investors

Post by Ketawa » Fri Oct 09, 2015 2:48 pm

Someone pointed out a while ago in the QSPIX thread that AQR funds are available at Scottrade. That appears to be true. The transaction fee is only $17 for I share classes with a $100 minimum.

Image

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wbond
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Re: QSPIX Nightmare - Closed Off to Retail Investors

Post by wbond » Sat Oct 10, 2015 10:25 am

And I was worried that you would have to wait for it to do poorly to no longer be able to buy it.

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wbond
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Re: QSPIX Nightmare - Closed Off to Retail Investors

Post by wbond » Sun Oct 11, 2015 4:01 pm

Well, back to CCFs? viewtopic.php?t=174733

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Re: QSPIX Nightmare - Closed Off to Retail Investors

Post by nisiprius » Sun Oct 11, 2015 5:29 pm

Image
To point out the obvious, according to AQR QSPIX is supposed to have a minimum purchase requirement of $5 million, and I don't think there are any true retail share classes. QSPNX, $1 million, QSLNX $1 million, QSLIX, $5 million; QSLRX, $50 million; QSPRX $50 million, and, yep, that's all there are.

It is a mystery to me what governs the channels through which mutual funds are made available to investors, but surely AQR's intention is that these funds be bought by advisory firms, making their purchases in the required minimum amount. They then mark them up by the amount of their advisory fee and sell them at retail. Just as with DFA funds, you are probably expected to go through an advisor.

If you can buy them in small amounts directly through a brokerage, that's probably some kind of unintentional loophole. I don't know what to make of the Scottrade web page. It is hard to believe that they are really supposed to, or mean to be selling a fund in $100 increments when AQR obviously doesn't mean for them to be sold that way. Maybe there some kind of "grey market" in mutual funds, just the way Frontline flea prevention is only supposed to be sold through veterinarians and yet you can buy it at Costco. On the other hand, people trying to buy e.g. Vanguard Admiral Shares classes of index fund frequently find that they are listed as available on brokerages, and orders can be placed, but don't go through.
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Re: QSPIX Nightmare - Closed Off to Retail Investors

Post by TradingPlaces » Sun Oct 11, 2015 7:01 pm

tarheel wrote:Thanks pshonore......

That's probably going to have to be my road to take. Appears that I can do so in my account.

Basically, I will be paying an extra 25 bps on top of what I pay now (1.5% ---> 1.75%) for the honor of investing in the QSPIX/QSPNX space. :annoyed
Sounds like a total rip-off. I would put the probability that AQR can beat that 1.75% hurdle as very very low.

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Re: QSPIX Nightmare - Closed Off to Retail Investors

Post by lack_ey » Sun Oct 11, 2015 7:09 pm

TradingPlaces wrote:
tarheel wrote:Thanks pshonore......

That's probably going to have to be my road to take. Appears that I can do so in my account.

Basically, I will be paying an extra 25 bps on top of what I pay now (1.5% ---> 1.75%) for the honor of investing in the QSPIX/QSPNX space. :annoyed
Sounds like a total rip-off. I would put the probability that AQR can beat that 1.75% hurdle as very very low.
Beat in which sense? Total net return after fees > 0%? Or Total net return after fees > [some benchmark, you tell me]?

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Re: QSPIX Nightmare - Closed Off to Retail Investors

Post by backpacker » Sun Oct 11, 2015 8:41 pm

This is A serious hazards of using boutique mutual funds. The expected returns may be great and you may be happy staying the course, but if the fund closes to you or investors in general, you're up a creek without a paddle.

If Vanguard were to ever inexplicably close its small value fund to new investments, I would be annoyed, but could replicate the same strategy using any of about a dozen funds.

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Re: QSPIX Nightmare - Closed Off to Retail Investors

Post by grap0013 » Mon Oct 12, 2015 7:21 am

TradingPlaces wrote:
Sounds like a total rip-off. I would put the probability that AQR can beat that 1.75% hurdle as very very low.
So far you are wrong. :twisted:
There are no guarantees, only probabilities.

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Re: QSPIX Nightmare - Closed Off to Retail Investors

Post by TradingPlaces » Tue Oct 13, 2015 9:58 pm

lack_ey wrote:
TradingPlaces wrote:
tarheel wrote:Thanks pshonore......

That's probably going to have to be my road to take. Appears that I can do so in my account.

Basically, I will be paying an extra 25 bps on top of what I pay now (1.5% ---> 1.75%) for the honor of investing in the QSPIX/QSPNX space. :annoyed
Sounds like a total rip-off. I would put the probability that AQR can beat that 1.75% hurdle as very very low.
Beat in which sense? Total net return after fees > 0%? Or Total net return after fees > [some benchmark, you tell me]?
I would say that a formula along these lines would be good:

f(ER) x ER, where f(ER) is a superlinear function of the expense ratio.

E.g., if ER is 1.75%, I would expect that the said fund beats the benchmark by 2-3x ER, after ER, or 3.5-5%.

So does AQR has, say, 20 year track record of beating the benchmark by 3.5%, after expenses? That would be my LOWEST accepted rate of return. 5% would be preferable.

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Re: QSPIX Nightmare - Closed Off to Retail Investors

Post by lack_ey » Tue Oct 13, 2015 10:23 pm

TradingPlaces wrote:
lack_ey wrote:
TradingPlaces wrote:
tarheel wrote:Thanks pshonore......

That's probably going to have to be my road to take. Appears that I can do so in my account.

Basically, I will be paying an extra 25 bps on top of what I pay now (1.5% ---> 1.75%) for the honor of investing in the QSPIX/QSPNX space. :annoyed
Sounds like a total rip-off. I would put the probability that AQR can beat that 1.75% hurdle as very very low.
Beat in which sense? Total net return after fees > 0%? Or Total net return after fees > [some benchmark, you tell me]?
I would say that a formula along these lines would be good:

f(ER) x ER, where f(ER) is a superlinear function of the expense ratio.

E.g., if ER is 1.75%, I would expect that the said fund beats the benchmark by 2-3x ER, after ER, or 3.5-5%.

So does AQR has, say, 20 year track record of beating the benchmark by 3.5%, after expenses? That would be my LOWEST accepted rate of return. 5% would be preferable.
But what's the benchmark for the fund? Cash under the mattress? T-bills, as listed in fund docs? S&P 500? Morningstar category (multialternatives) average?

The expectation for returns should probably be negative alpha over systematic non-market beta exposures. But the alternative betas (value, momentum, etc.) may carry total returns over a given benchmark, depending on what it is. Possibly even over by a margin of 3.5-5%, but again that depends on what you define as the benchmark.

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Re: QSPIX Nightmare - Closed Off to Retail Investors

Post by SnowSkier » Tue Oct 13, 2015 10:46 pm

It's only one year, but QSPNX is looking pretty good. :happy (that's not why I own it...I own it because it has decent "expected returns" and it is Very uncorrelated to stocks & bonds)

Here are the 1 year and 3 month total returns of some of the funds I own (as of today, per Morningstar). This is, of course, after the high expenses of the 2 AQR funds here.

I am certainly not recommending that anyone go buy these AQR funds, or saying that the trailing 12-month or 3-month returns matter. I am mainly pointing out that (1) they have done a nice job overcoming or earning their expense ratios, and (2) they have performed relatively well in the recent interesting environment. There are much longer threads (and a great book "Expected Returns" by Antti Ilmanen) to Read if you are interested in researching QSPIX/QSPNX (or Ignore if you are not interested).

Code: Select all

                          Total Return 12mo       3mo
QMHNX  *AQR* Managed Futures HV        21.6%      5.9%
QSPNX  *AQR* Style Premia Alternative  10.7%      4.6%
VTSAX  Vanguard Total Stock Mkt Index   9.4%     -4.8%
VTMGX  Vanguard Dev Mkt Index           2.7%     -6.3%
VBTIX  Vanguard Total Bond Mkt Index    1.7%      1.8%
VEMAX  Vanguard Emerging Mkt Index    -12.0%    -10.5%

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Re: QSPIX Nightmare - Closed Off to Retail Investors

Post by grap0013 » Wed Oct 14, 2015 12:12 pm

TradingPlaces wrote:
I would say that a formula along these lines would be good:

f(ER) x ER, where f(ER) is a superlinear function of the expense ratio.

E.g., if ER is 1.75%, I would expect that the said fund beats the benchmark by 2-3x ER, after ER, or 3.5-5%.

So does AQR has, say, 20 year track record of beating the benchmark by 3.5%, after expenses? That would be my LOWEST accepted rate of return. 5% would be preferable.
That's ridiculous. Take 60:40 total world stock:total bond. Then add 10% QSPNX and make it 55:35:10. If portfolio #1 has higher returns you win. If portfolio #2 has higher returns you lose. So far you are losing: https://www.portfoliovisualizer.com/bac ... ount=10000
There are no guarantees, only probabilities.

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Re: QSPIX Nightmare - Closed Off to Retail Investors

Post by TradingPlaces » Wed Oct 14, 2015 10:04 pm

grap0013 wrote:
TradingPlaces wrote:
I would say that a formula along these lines would be good:

f(ER) x ER, where f(ER) is a superlinear function of the expense ratio.

E.g., if ER is 1.75%, I would expect that the said fund beats the benchmark by 2-3x ER, after ER, or 3.5-5%.

So does AQR has, say, 20 year track record of beating the benchmark by 3.5%, after expenses? That would be my LOWEST accepted rate of return. 5% would be preferable.
That's ridiculous. Take 60:40 total world stock:total bond. Then add 10% QSPNX and make it 55:35:10. If portfolio #1 has higher returns you win. If portfolio #2 has higher returns you lose. So far you are losing: https://www.portfoliovisualizer.com/bac ... ount=10000
First, about your ridiculous comment.

Let's recap:

- you asked me a question probing MY PREFERENCES,
- I give you my preferences,
- you say it is ridiculous.

What gives?

Next, you say, "you lose", Is the "you" in that sentence, me, as in boggle heads user "Trading Places" ? If you think so, you are thoroughly mistaken, because:

- you don't get to set the rules of the game,
- if I am to play, I get to dictate part of the rules. For that, see my post.

As for who is the loser: AQR is. Because there is about zero chance that I will invest any money into AQR.

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Re: QSPIX Nightmare - Closed Off to Retail Investors

Post by TradingPlaces » Wed Oct 14, 2015 10:13 pm

lack_ey wrote:
TradingPlaces wrote:
lack_ey wrote:
TradingPlaces wrote:
tarheel wrote:Thanks pshonore......

That's probably going to have to be my road to take. Appears that I can do so in my account.

Basically, I will be paying an extra 25 bps on top of what I pay now (1.5% ---> 1.75%) for the honor of investing in the QSPIX/QSPNX space. :annoyed
Sounds like a total rip-off. I would put the probability that AQR can beat that 1.75% hurdle as very very low.
Beat in which sense? Total net return after fees > 0%? Or Total net return after fees > [some benchmark, you tell me]?
I would say that a formula along these lines would be good:

f(ER) x ER, where f(ER) is a superlinear function of the expense ratio.

E.g., if ER is 1.75%, I would expect that the said fund beats the benchmark by 2-3x ER, after ER, or 3.5-5%.

So does AQR has, say, 20 year track record of beating the benchmark by 3.5%, after expenses? That would be my LOWEST accepted rate of return. 5% would be preferable.
But what's the benchmark for the fund? Cash under the mattress? T-bills, as listed in fund docs? S&P 500? Morningstar category (multialternatives) average?

The expectation for returns should probably be negative alpha over systematic non-market beta exposures. But the alternative betas (value, momentum, etc.) may carry total returns over a given benchmark, depending on what it is. Possibly even over by a margin of 3.5-5%, but again that depends on what you define as the benchmark.
The benchmark for the fund should be VERY OBVIOUS and easy to infer.

Several approaches:
- fund discloses it,
- fund has daily returns; you take the daily returns for 10 years, and regress against known risk factors (but don't go overboard),
- you have morningstar or whoever determin it.

E.g., if the fund is mostly in US stocks, the Total US Stock market is a good STARTING point for the benchmark.
If the fund is Treasuries then US Bond Index.

On the other hand, if this is a long-short fund, then the benchmark needs to be very carefully calculated by taking account the risk that the long-short fund takes. E.g., even a long-short fund can have a beta exposure, so comparing to cash is not fair.

Using a benchmark should be one of the EASIEST things in this exercise.

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Re: QSPIX Nightmare - Closed Off to Retail Investors

Post by TradingPlaces » Wed Oct 14, 2015 10:15 pm

lack_ey wrote: The expectation for returns should probably be negative alpha over systematic non-market beta exposures. But the alternative betas (value, momentum, etc.) may carry total returns over a given benchmark, depending on what it is. Possibly even over by a margin of 3.5-5%, but again that depends on what you define as the benchmark.
I mean, if all the AQR fund does is load on some style factors, then the benchmark should reflect the style factors.

Then, if AQR has negative alpha over THAT benchmark, then I think we are done. We need to kick AQR to the curb.

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Re: QSPIX Nightmare - Closed Off to Retail Investors

Post by lack_ey » Wed Oct 14, 2015 10:35 pm

TradingPlaces wrote:The benchmark for the fund should be VERY OBVIOUS and easy to infer.
I disagree.
TradingPlaces wrote:Several approaches:
- fund discloses it,
- fund has daily returns; you take the daily returns for 10 years, and regress against known risk factors (but don't go overboard),
- you have morningstar or whoever determin it.

E.g., if the fund is mostly in US stocks, the Total US Stock market is a good STARTING point for the benchmark.
If the fund is Treasuries then US Bond Index.

On the other hand, if this is a long-short fund, then the benchmark needs to be very carefully calculated by taking account the risk that the long-short fund takes. E.g., even a long-short fund can have a beta exposure, so comparing to cash is not fair.

Using a benchmark should be one of the EASIEST things in this exercise.
It's complicated because it's a long-short fund with net zero market beta, investing across stocks, stock indices (via futures), bonds, interest rates, currencies, commodities. Cash isn't fair, but what is?
TradingPlaces wrote:
lack_ey wrote: The expectation for returns should probably be negative alpha over systematic non-market beta exposures. But the alternative betas (value, momentum, etc.) may carry total returns over a given benchmark, depending on what it is. Possibly even over by a margin of 3.5-5%, but again that depends on what you define as the benchmark.
I mean, if all the AQR fund does is load on some style factors, then the benchmark should reflect the style factors.

Then, if AQR has negative alpha over THAT benchmark, then I think we are done. We need to kick AQR to the curb.
But how do you even assess the factor loadings or what the style benchmark is? Again, this goes way beyond global stocks, for better or worse. Perform a regression, maybe, but using what? Loadings based on UMD, HML, etc. in stocks? It does carry trading in some asset classes but not in stocks.

And if you evaluate any factor fund, be it a long-only small-cap value or fundamental index or something from DFA or any other kind of product like that, then generally of these have negative alpha once you take into consideration the loadings properly, because you attribute all of the performance to market beta and all the other exposures, but the transaction costs internally and ER make the tracking underperform that ideal (also, implementation issues and the issues of research factor exposures being different from what is attainable in more liquid securities). Do you kick all of these to the curb?

If the managers choose a measurement of value that outperforms other value measures over a given period of time, is that alpha? If a fund has unusual factor exposures not found in many other funds, is this a form of non-market beta that the benchmark should include? If a fund misses out on some exposures to reduce trading costs, is that losing to the benchmark or beating it? If the benchmark is too overfit to what the fund does, then pretty much no fund can beat its benchmark.

You said to potentially regress on known risk factors, but "don't go overboard." Some clarification could be in order.

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Re: QSPIX Nightmare - Closed Off to Retail Investors

Post by grap0013 » Thu Oct 15, 2015 5:08 pm

TradingPlaces wrote:
First, about your ridiculous comment.

Let's recap:

- you asked me a question probing MY PREFERENCES,
- I give you my preferences,
- you say it is ridiculous.

What gives?

Next, you say, "you lose", Is the "you" in that sentence, me, as in boggle heads user "Trading Places" ? If you think so, you are thoroughly mistaken, because:

- you don't get to set the rules of the game,
- if I am to play, I get to dictate part of the rules. For that, see my post.

As for who is the loser: AQR is. Because there is about zero chance that I will invest any money into AQR.
You said you'd put the probability of AQR outperforming with those higher fees as "very very low" above. You are incorrect so far. Maybe your posts are just rubbing me the wrong way. In another thread you questioned Jack Bogle's quality of his advice due to his age. Your other posts are kind of like typing without thinking first. Sorry, not trying to be a jerk, just being honest. Maybe I'll just refrain from responding to you in the future because if you can't say something nice....
There are no guarantees, only probabilities.

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Re: QSPIX Nightmare - Closed Off to Retail Investors

Post by TradingPlaces » Sun Oct 18, 2015 5:42 pm

grap0013 wrote:
TradingPlaces wrote:
First, about your ridiculous comment.

Let's recap:

- you asked me a question probing MY PREFERENCES,
- I give you my preferences,
- you say it is ridiculous.

What gives?

Next, you say, "you lose", Is the "you" in that sentence, me, as in boggle heads user "Trading Places" ? If you think so, you are thoroughly mistaken, because:

- you don't get to set the rules of the game,
- if I am to play, I get to dictate part of the rules. For that, see my post.

As for who is the loser: AQR is. Because there is about zero chance that I will invest any money into AQR.
You said you'd put the probability of AQR outperforming with those higher fees as "very very low" above. You are incorrect so far. Maybe your posts are just rubbing me the wrong way. In another thread you questioned Jack Bogle's quality of his advice due to his age. Your other posts are kind of like typing without thinking first. Sorry, not trying to be a jerk, just being honest. Maybe I'll just refrain from responding to you in the future because if you can't say something nice....
Ok, in the interest of not raising the stakes further, let's close this sub-plot.

Look, feel free to respond to my comments or not. I generally pay very little attention to who I am responding to. That helps me be clear of biases. So I can not promise I won't respond to your comments in the future, probably because in 10 days I won't even remember to associate that future topic with this one.

With respect to comments here, I generally treat those as conversation. I don't prepare elaborate theses and spend days thinking about them before I type. I don't have time for that.

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Re: QSPIX Nightmare - Closed Off to Retail Investors

Post by TradingPlaces » Sun Oct 18, 2015 6:19 pm

lack_ey wrote:
TradingPlaces wrote:The benchmark for the fund should be VERY OBVIOUS and easy to infer.
I disagree.
TradingPlaces wrote:Several approaches:
- fund discloses it,
- fund has daily returns; you take the daily returns for 10 years, and regress against known risk factors (but don't go overboard),
- you have morningstar or whoever determin it.

E.g., if the fund is mostly in US stocks, the Total US Stock market is a good STARTING point for the benchmark.
If the fund is Treasuries then US Bond Index.

On the other hand, if this is a long-short fund, then the benchmark needs to be very carefully calculated by taking account the risk that the long-short fund takes. E.g., even a long-short fund can have a beta exposure, so comparing to cash is not fair.

Using a benchmark should be one of the EASIEST things in this exercise.
It's complicated because it's a long-short fund with net zero market beta, investing across stocks, stock indices (via futures), bonds, interest rates, currencies, commodities. Cash isn't fair, but what is?
TradingPlaces wrote:
lack_ey wrote: The expectation for returns should probably be negative alpha over systematic non-market beta exposures. But the alternative betas (value, momentum, etc.) may carry total returns over a given benchmark, depending on what it is. Possibly even over by a margin of 3.5-5%, but again that depends on what you define as the benchmark.
I mean, if all the AQR fund does is load on some style factors, then the benchmark should reflect the style factors.

Then, if AQR has negative alpha over THAT benchmark, then I think we are done. We need to kick AQR to the curb.
But how do you even assess the factor loadings or what the style benchmark is? Again, this goes way beyond global stocks, for better or worse. Perform a regression, maybe, but using what? Loadings based on UMD, HML, etc. in stocks? It does carry trading in some asset classes but not in stocks.

And if you evaluate any factor fund, be it a long-only small-cap value or fundamental index or something from DFA or any other kind of product like that, then generally of these have negative alpha once you take into consideration the loadings properly, because you attribute all of the performance to market beta and all the other exposures, but the transaction costs internally and ER make the tracking underperform that ideal (also, implementation issues and the issues of research factor exposures being different from what is attainable in more liquid securities). Do you kick all of these to the curb?

If the managers choose a measurement of value that outperforms other value measures over a given period of time, is that alpha? If a fund has unusual factor exposures not found in many other funds, is this a form of non-market beta that the benchmark should include? If a fund misses out on some exposures to reduce trading costs, is that losing to the benchmark or beating it? If the benchmark is too overfit to what the fund does, then pretty much no fund can beat its benchmark.

You said to potentially regress on known risk factors, but "don't go overboard." Some clarification could be in order.
You said, you disagree. I think this is not a matter of agreement or disagreement. This is a matter of disclosure. I am saying that figuring out sources of risk is a prerequisite for good fund management. If the fund management can not do it, or won't do, this is bad. Opacity is not your friend here.

Firstly, if your fund is so complicated that you are mixing all kinds of junk, it is time to clean-up a little bit: decompose the fund into well understood pieces.

1. Is this Long-short with zero dollar exposure?
2. Is it possible to separate, on the long side, exposures to obvious asset classes? E.g., equities, treasuries, currencies, commodities, etc. Are the shorts equally matched?

3. If answer to #2 is clear yes, then we are good. If not, fund management needs to explain why stocks are hedged with commodities or FX, etc,

4. Let's assume #2 is yes. Then, separate part of the portfolio, equal parts long and short, that is equities. Then you can use something like Barra GEM2 to do a thorough analysis. In fact, you can do this analysis using ANY reasonable model. But it is important to prioritize sources of risk.

Because really we are doing this analysis in vacuum, I have no choice to but to show examples.

E.g., portfolio could be 100% long / 100% short, but 50% long beta. This is just beta-in-closet. Hopefully this AQR fund is not one of those. Because charging 150 bps for 50% long beta dressed up as long-short is just highway robbery because 50% long beta can be achieved with 50% of the assets using futures, for example, or VTI.

From a practical point of view, eliminating every source of factor risk corresponding to Barra GEM3 might be very hard. Because in that case, the fund has to deliver pure alpha out of the individual equities' idiosyncratic risk source (and that, I am sure, AQR can not do, because, well, my personal opinion is that they have no alpha).

You can do the same for every asset class slice. Of course, as you go down the list of asset classes (equities, sov bonds, credit, comm, fx, etc; and from developed countries to emerging), it gets harder because of less transparency.

BTW, it is not the customer's job to do the above exercise. Really, the fund needs to publish all that.

But I think all these analyses are an overkill. If the AQR fund loads on some variations of Fama French Plus factors, then we are done.

My personal opinion is that loading on obvious factors should not cost 150 bps.

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Re: QSPIX Nightmare - Closed Off to Retail Investors

Post by lack_ey » Sun Oct 18, 2015 7:02 pm

The fund is offsetting long/short across each asset class individually with zero equity market beta and so on. Supposedly a full attribution analysis is given by AQR to interested RIAs. I don't know if it's via GEM2 or similar, or their own benchmarks, but in the very least there's some indication of what component contributed what gain/loss in the quarter. They disclose risk allocations to different asset classes publicly.

But they are upfront about just loading on obvious variations of FF-style factors, so you'd be done here.

IMHO the question remains of how much they are loading on each factor. If the fund cost 0.25% but had only a small fraction of the same exposures then the price might look reasonable, but it wouldn't be very useful, so I don't know if a strict ER cutoff is sensible. They run a half-as-leveraged version of the fund, presumably with about half the exposures, for 0.85%.

Do you know of other funds with higher FF-plus-style non-beta, non-size (SMB), non-credit, non-term exposures? Market beta, size, etc. can be gotten relatively cheaply elsewhere. Long-only value in stocks is pretty cheap, as is momentum, but that comes with a lot of market beta and not even that much value (momentum) exposure. Except maybe if you're looking at deep value, but most deep value funds tend to come with negative momentum. Most of the long-short funds tend to be more expensive than 0.85% and many in striking distance or even past 1.50%, and these are typically not diversified across asset classes.

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QSPIX Availability - Fidelity no longer

Post by SpaceCowboy » Thu Oct 22, 2015 9:25 pm

For those fans of QSPIX, it appears that it is no longer available from Fidelity at reduced minimums. I own it at Fidelity through an Individual 401(k) and it now says that it is only available through an advisor. Within my taxable accounts, it shows availability only with a $5 million minimum investment. The N class is available with only a $1 million investment.
Not sure if the availability has changed at TD or Scottrade.

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Re: QSPIX Availability - Fidelity no longer

Post by Angst » Fri Oct 23, 2015 1:34 am

There's another thread already discussing this.

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Re: QSPIX Nightmare - Closed Off to Retail Investors

Post by LadyGeek » Fri Oct 23, 2015 4:25 pm

^^^ I merged rrppve's thread into here. The combined thread is now in the Investing - Theory, News & General forum (news).
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Re: QSPIX Nightmare - Closed Off to Retail Investors

Post by Random Walker » Fri Oct 23, 2015 5:19 pm

When did this start? I have QSPNX in Fidelity 401K and best I can tell contributions were made to it last week.

Dave

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Re: QSPIX Nightmare - Closed Off to Retail Investors

Post by lack_ey » Fri Oct 23, 2015 5:55 pm

Random Walker wrote:When did this start? I have QSPNX in Fidelity 401K and best I can tell contributions were made to it last week.

Dave
It was in the last couple of months. Only I shares (QSPIX). N shares unaffected. It's still available at many other brokerages, some with low minimums.

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Re: QSPIX Nightmare - Closed Off to Retail Investors

Post by afan » Fri Oct 23, 2015 7:08 pm

If we had 10 years of data, we could run a backtest of the miracle fund. Compare a 60/40 stock bond portfolio, say total stock/total bond or total stock/ intermediate term muni, to portfolios with increasing allocations to this fund. Do the same for other funds with long-short, factor bet, genius manager, or whatever strategies. If adding the fund to the stock bond mix improves Sharpe ratio of the overall portfolio then the fund "worked". If adding it to the stock bond portfolio does not improve the Sharpe ratio then it does not work.

Now 10 years is unlikely to be enough time to evaluate the performance of a single fund. The noise in the data is likely too great to expect to reach a conclusion about an individual fund. But if you had several dozen similar funds then 10 years of data might be enough to test whether the funds as a group improved over straight stock and bond investing. Or maybe you would need 20 years.

I hope enough people put their money in these funds over the next 10-20 years that we can get some data. We need test subjects. Let hope some people volunteer. We can sit comfortably in our 2-4 fund portfolios and watch the story unfold.
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Re: QSPIX Nightmare - Closed Off to Retail Investors

Post by empb » Sun Nov 08, 2015 12:24 pm

Ketawa wrote:Someone pointed out a while ago in the QSPIX thread that AQR funds are available at Scottrade. That appears to be true. The transaction fee is only $17 for I share classes with a $100 minimum.

Image
Having not seen any posts on people actually accessing QSPIX at Scottrade, I'm moving my Roth from Fidelity to maintain access to QSPIX. I'll post if there's any problems.

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Re: QSPIX Nightmare - Closed Off to Retail Investors

Post by claimui » Mon Nov 09, 2015 12:48 am

A little late to the thread, but I also attempted to place an initial purchase for the similar QMNIX (AQR Equity Market Neutral - I class) through TD Ameritrade around late October, only to have the order rejected. Checking further, I noticed that all of the I class shares have been removed from TD Ameritrade's funds list if you select the option to view funds by family. You can still put in the ticker symbol manually, but then you may get rejected like my order did.

The N class shares are still available through TD Ameritrade -- but with a $1 million minimum.

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Re: QSPIX Nightmare - Closed Off to Retail Investors

Post by empb » Mon Nov 09, 2015 7:08 am

Here's a message from Scottrade confirming the availability. Taking that with a grain of salt!
Dear Valued Investor:

Thank you for contacting us. I can confirm that this fund is available at Scottrade for all investors. Transactions fees would be applied to this account. There is a $17 transaction fee applied to every trade in this fund (buy, sell or exchange).

Please let us know if we may be of further assistance.

Sincerely,

Bryan C.
National Service Center | Scottrade, Inc.

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Re: QSPIX Nightmare - Closed Off to Retail Investors

Post by grap0013 » Mon Nov 09, 2015 8:13 am

empb wrote: Having not seen any posts on people actually accessing QSPIX at Scottrade, I'm moving my Roth from Fidelity to maintain access to QSPIX. I'll post if there's any problems.
Why not just buy QSPNX thru Fidelity instead?
There are no guarantees, only probabilities.

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Re: QSPIX Nightmare - Closed Off to Retail Investors

Post by empb » Mon Nov 09, 2015 10:29 am

grap0013 wrote:
empb wrote: Having not seen any posts on people actually accessing QSPIX at Scottrade, I'm moving my Roth from Fidelity to maintain access to QSPIX. I'll post if there's any problems.
Why not just buy QSPNX thru Fidelity instead?
A 25 bps increase in expense ratio would be significantly higher than a $17 transaction fee.

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Re: QSPIX Nightmare - Closed Off to Retail Investors

Post by Maynard F. Speer » Mon Nov 09, 2015 11:41 am

afan wrote:If we had 10 years of data, we could run a backtest of the miracle fund. Compare a 60/40 stock bond portfolio, say total stock/total bond or total stock/ intermediate term muni, to portfolios with increasing allocations to this fund. Do the same for other funds with long-short, factor bet, genius manager, or whatever strategies. If adding the fund to the stock bond mix improves Sharpe ratio of the overall portfolio then the fund "worked". If adding it to the stock bond portfolio does not improve the Sharpe ratio then it does not work.

Now 10 years is unlikely to be enough time to evaluate the performance of a single fund. The noise in the data is likely too great to expect to reach a conclusion about an individual fund. But if you had several dozen similar funds then 10 years of data might be enough to test whether the funds as a group improved over straight stock and bond investing. Or maybe you would need 20 years.

I hope enough people put their money in these funds over the next 10-20 years that we can get some data. We need test subjects. Let hope some people volunteer. We can sit comfortably in our 2-4 fund portfolios and watch the story unfold.
QSPIX is a quant hedge fund without the 20% performance fee .. There's lots of data on how these work within portfolios

Let's be honest, the big experiment we're going to see unfold this era is what happens to stocks and bonds (and the global economy) after years of asset price inflation through QE

Stocks are priced as if we've got the healthiest economy in history; and bonds are priced as if we've got the weakest ... Whether we sustain things for another 10-20 years with QE, throw all your assumptions out the window - this is the 'new abnormal' .. Hold onto your hats :beer
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Re: QSPIX Nightmare - Closed Off to Retail Investors

Post by Angst » Mon Nov 09, 2015 12:59 pm

empb wrote:Having not seen any posts on people actually accessing QSPIX at Scottrade, I'm moving my Roth from Fidelity to maintain access to QSPIX. I'll post if there's any problems.
empb, you can sleep well. I finally drank the kool-aid, just last week, and it works at Scottrade. No problems buying QSPIX, done deal, settled and everything.

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Re: QSPIX Nightmare - Closed Off to Retail Investors

Post by grap0013 » Tue Nov 10, 2015 8:53 am

empb wrote:
grap0013 wrote:
empb wrote: Having not seen any posts on people actually accessing QSPIX at Scottrade, I'm moving my Roth from Fidelity to maintain access to QSPIX. I'll post if there's any problems.
Why not just buy QSPNX thru Fidelity instead?
A 25 bps increase in expense ratio would be significantly higher than a $17 transaction fee.
I was just thinking about the "hassle factor" of moving a Roth just to access a fund. Especially considering the recent history of AQR making funds available and then not available. I'm still buying these AQR funds because I like how they operate but I'm not definitely going to chase brokerages just for their funds. To each their own! :sharebeer
There are no guarantees, only probabilities.

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Re: QSPIX Nightmare - Closed Off to Retail Investors

Post by empb » Tue Nov 10, 2015 9:13 am

grap0013 wrote:
empb wrote:
grap0013 wrote:
empb wrote: Having not seen any posts on people actually accessing QSPIX at Scottrade, I'm moving my Roth from Fidelity to maintain access to QSPIX. I'll post if there's any problems.
Why not just buy QSPNX thru Fidelity instead?
A 25 bps increase in expense ratio would be significantly higher than a $17 transaction fee.
I was just thinking about the "hassle factor" of moving a Roth just to access a fund. Especially considering the recent history of AQR making funds available and then not available. I'm still buying these AQR funds because I like how they operate but I'm not definitely going to chase brokerages just for their funds. To each their own! :sharebeer
Meh. Scottrade will reimburse the account closure fee and the 25 bps (on 10% of the portfolio) is saved ad infinitum for putting one form in the mail. If it's a hassle, it's well worth it IMO.

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Re: QSPIX Nightmare - Closed Off to Retail Investors

Post by nisiprius » Tue Nov 10, 2015 9:39 am

I think it's interesting (and frustrating) that nobody ever seems to be able to get a definitive answer to the seemingly simple question "Will brokerage Z sell you fund XYZZX?" That is, do they intend to offer it for sale? What I know from my own experience and from reading the experiences of other forum members is that
  • What the website says may be wrong;
  • What a rep tells you over the phone may be wrong (they apparently don't have access to more reliable information);
  • The only way to find out for sure is to place an order;
  • Orders for funds that seemingly should be available may be rejected;
  • Orders for funds that seemingly should not be available may be accepted;
  • In the latter case, you can never tell if the brokerage means to be selling you that fund or whether it's a mistake that they will correct once they discover that it is occurring.
I'd almost forgotten that being able to buy mutual funds through a brokerage was a Charles Schwab innovation, and it would be very interesting to know what actually happens behind the scenes--what business deals are being cut, and so forth--when you buy a mutual fund through a brokerage.
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Re: QSPIX Nightmare - Closed Off to Retail Investors

Post by Mr Rosco » Tue Nov 10, 2015 8:34 pm

QSPNX is up 0.48% today
QSPIX is up 0.38% today

Being the fee for QSPNX is 0.25% higher than QSPIX shouldn't it always lag by 0.25%?

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Re: QSPIX Nightmare - Closed Off to Retail Investors

Post by lack_ey » Tue Nov 10, 2015 8:47 pm

Mr Rosco wrote:QSPNX is up 0.48% today
QSPIX is up 0.38% today

Being the fee for QSPNX is 0.25% higher than QSPIX shouldn't it always lag by 0.25%?
No, if it were 0.25% worse daily that would be terrible. With about 250 trading days in a year, that would add up quickly and get ugly. :shock:

It's probably just some quirk of the reporting with respect to roundoff error in NAV prices.

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Re: QSPIX Nightmare - Closed Off to Retail Investors

Post by HomerJ » Tue Nov 10, 2015 9:14 pm

Since inception it looks like it's done about as well as Vanguard Total Stock. So far, the managers have done a good job beating the stock market by 1.5%, which they kept for themselves as fees.

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Re: QSPIX Nightmare - Closed Off to Retail Investors

Post by lack_ey » Tue Nov 10, 2015 9:48 pm

We can play the arbitrary, unrelated benchmark game all day long, sure.

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Re: QSPIX Nightmare - Closed Off to Retail Investors

Post by Tamales » Tue Nov 10, 2015 10:49 pm

nisiprius wrote: I'd almost forgotten that being able to buy mutual funds through a brokerage was a Charles Schwab innovation...
Well I did not know that.
I searched and found this Schwab history: http://aboutschwab.com/about/history
They don't use quite the same words but they do say they launched the "mutual fund marketplace" in 1984, with 140 no-load funds.

(Another thing I learned from that link that I did not know was that Bank of America bought Schwab in 1983, and in 1987 Charles Schwab bought the company back. Probably a good thing for the industry it didn't remain under B of A)

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