Why [was] QSPIX steadily declining?

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Lieutenant.Columbo
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Re: Why is QSPIX steadily declining?

Post by Lieutenant.Columbo »

lack_ey wrote: Tue Oct 24, 2017 10:14 pm Oh yeah, did anybody else catch the launch of the AQR Alternative Risk Premia Fund (QRPIX,QRPNX, QRPRX)?

It's another long-short, market-neutral, leveraged fund owning traditional assets and many derivatives positions, targeting value, momentum, carry, defensive, trend, and (short) volatility strategies across equities (individual stocks and wider market indexes), bonds, and currencies, targeting about 8% annual volatility. Obviously realized vol will not track the target close to perfectly.

For reference, the older AQR Style Premia (QSPIX, QSPNX, QSPRX) is a long-short, market-neutral, leveraged fund owning traditional assets and many derivatives positions, targeting value, momentum, carry, and defensive across equities (individual stocks and wider market indexes), bonds, interest rates, commodities, and currencies, targeting about 10% annual volatility.

Both are similarly expensive, though note where the ER as listed some places might include dividends on short sales, which is kind of a stupid way to do the accounting. The actual management fees are above 1% by themselves, though, so expensive any way you look at it.

Recall that Style Premia got closed to new investors on account of a couple of capacity concerns in some of the asset classes targeted (commodities, interest rates both via derivatives). So this is like Style Premia II in jettisoning those parts. Then it adds trend following, which is what managed futures funds do, as well as volatility selling.
so, does it make sense for those already using AQR Style Premia (QSPIX, QSPNX, QSPRX) and AQR Managed Futures HV (QMHIX, QMHNX, QMHRX) in tax defered accounts to move out of them and into AQR Alternative Risk Premia Fund (QRPIX,QRPNX, QRPRX)?
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grap0013
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Re: Why is QSPIX steadily declining?

Post by grap0013 »

^^^That's exactly what I'm wondering.

I think I'm too lazy to do anything and I don't want to pay the $49.95 fee to purchase it. Think I'll just stick with my 15% QSPIX and 5% QMHIX. Might add some volatility scaling at some point eg AVRPX. It basically gets you to the same place.
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Re: Why is QSPIX steadily declining?

Post by grap0013 »

pkcrafter wrote: Tue Oct 24, 2017 10:44 pm
nisiprius wrote: Tue Oct 24, 2017 9:04 pm
pkcrafter wrote: Thu Sep 29, 2016 4:24 pm ER of 1.48% :shock: How does anyone who calls themselves a Boglehead get interested in such a fund?
Because according to Larry Swedroe, you should divide the expense ratio by two for a long-short fund
Priceless :!:

And as of today, QSPIX ER now seems to be-- drum roll...

Net Expenses - 2.35 %. But yes, there is a fee waver that lowers the fee to 1.5%* through 4/2018

*(excluding interest, taxes, dividends on short sales, borrowing costs, acquired fund fees and expenses, interest expense relating to short sales and extraordinary expenses)

https://funds.aqr.com/our-funds/alterna ... ative-fund

Paul
Not very helpful. QSPIX YTD returns are 9.07%. Does it matter if the ER is 1.5 or 2%? Fees matter most when you are comparing two like minded funds with similar strategies. Cue inner Larry Swedroe, "many people know the cost of something but do not know the value".

I don't want a raise because I don't want my taxes (fees) to go up. I don't want to start a business because there are fees associated with it. Dead horse has been beaten.
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Re: Why is QSPIX steadily declining?

Post by rkhusky »

grap0013 wrote: Wed Oct 25, 2017 7:27 am Not very helpful. QSPIX YTD returns are 9.07%. Does it matter if the ER is 1.5 or 2%? Fees matter most when you are comparing two like minded funds with similar strategies. Cue inner Larry Swedroe, "many people know the cost of something but do not know the value".
YTD returns don''t have much value. TSM YTD is 16.05%. TISM YTD is 23.36%. Returns come and go. Expenses are a constant drag.
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matjen
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Re: Why is QSPIX steadily declining?

Post by matjen »

rkhusky wrote: Wed Oct 25, 2017 7:51 am
grap0013 wrote: Wed Oct 25, 2017 7:27 am Not very helpful. QSPIX YTD returns are 9.07%. Does it matter if the ER is 1.5 or 2%? Fees matter most when you are comparing two like minded funds with similar strategies. Cue inner Larry Swedroe, "many people know the cost of something but do not know the value".
YTD returns don''t have much value. TSM YTD is 16.05%. TISM YTD is 23.36%. Returns come and go. Expenses are a constant drag.
You know what has even less value? Comparing QSPIX to Total US or Total International equities. You glossed over Grap's salient point about "like minded funds and similar strategies." Why didn't you pick bitcoin? :annoyed

Can't one at least compare to Vanguard's VMNFX (Market Neutral) which has a .22 expense ratio. Of course you don't because its performance doesn't stack up. (-3.31) :shock:
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Re: Why is QSPIX steadily declining?

Post by lack_ey »

Lieutenant.Columbo wrote: Wed Oct 25, 2017 6:31 am so, does it make sense for those already using AQR Style Premia (QSPIX, QSPNX, QSPRX) and AQR Managed Futures HV (QMHIX, QMHNX, QMHRX) in tax defered accounts to move out of them and into AQR Alternative Risk Premia Fund (QRPIX,QRPNX, QRPRX)?
I don't know anything about the new fund other than from fund filings. There could be something we don't know yet, or some misunderstanding I have with regards to how the fund is run or the strategy. As for the parts we do know, each fund gets something unique the other doesn't. If you like the strategy, the interest rates and commodities trading in the old fund that you don't get in the new one might add value.

I'd say one advantage of consolodating, if you like all these parts and are already paying for them, would be not having or seeing trend following (managed futures) in its own fund. The problem with any alternatives strategy is that they lose money a lot and it looks and feels even stupider because you have to pay a high fee for that pleasure while others doing something simpler are making more. I think the multistrategy products are likely easier to stick with, assuming each of the strategies actually has positive mean, which of course a lot of people doubt to begin with.
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Re: Why is QSPIX steadily declining?

Post by rkhusky »

matjen wrote: Wed Oct 25, 2017 8:15 am
rkhusky wrote: Wed Oct 25, 2017 7:51 am
grap0013 wrote: Wed Oct 25, 2017 7:27 am Not very helpful. QSPIX YTD returns are 9.07%. Does it matter if the ER is 1.5 or 2%? Fees matter most when you are comparing two like minded funds with similar strategies. Cue inner Larry Swedroe, "many people know the cost of something but do not know the value".
YTD returns don''t have much value. TSM YTD is 16.05%. TISM YTD is 23.36%. Returns come and go. Expenses are a constant drag.
You know what has even less value? Comparing QSPIX to Total US or Total International equities. You glossed over Grap's salient point about "like minded funds and similar strategies." Why didn't you pick bitcoin? :annoyed

Can't one at least compare to Vanguard's VMNFX (Market Neutral) which has a .22 expense ratio. Of course you don't because its performance doesn't stack up. (-3.31) :shock:
YTD returns for QSPIX, Total US, Total Int'l, or VMNFX are not very useful for making any kind of decision.
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Re: Why is QSPIX steadily declining?

Post by matjen »

rkhusky wrote: Wed Oct 25, 2017 10:52 am YTD returns for QSPIX, Total US, Total Int'l, or VMNFX are not very useful for making any kind of decision.
Fair point. Agreed in general terms.
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Re: Why is QSPIX steadily declining?

Post by lack_ey »

Short-term returns (i.e. single digits years) really gives you more of a sense of the typical volatility of a fund—though it will likely not catch the tails of distributions, which particularly for leveraged alternatives funds could be severe generally—than the mean.
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Re: Why is QSPIX steadily declining?

Post by tarheel »

grap0013 wrote: Wed Oct 25, 2017 7:23 am ^^^That's exactly what I'm wondering.

I think I'm too lazy to do anything and I don't want to pay the $49.95 fee to purchase it. Think I'll just stick with my 15% QSPIX and 5% QMHIX. Might add some volatility scaling at some point eg AVRPX. It basically gets you to the same place.
I'm basically with grap here. With 7.5% QSPIX and 7.5% QMHIX I don't really see the need to make any changes involving the new fund. Unless we find out something new about it.....maybe this is the new alternative for people who didn't get in on QSPIX earlier.
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Re: Why is QSPIX steadily declining?

Post by ilan1h »

I climbed on this bandwagon in late 2015/early 2016 partly based on Larry Swedroe's enthusiastic comments on this fund. As of today my ROI on this has been about 23%. I initially bought the fund as a defensive hedge against a market downturn and because I wanted at least one part of my portfolio to be completely uncorrelated to the stock or bond markets. I am not concerned that it has "underperformed" the market because obviously that is not the benchmark to use. It does appear to have done better than many of the alt funds during this same period. My main worry is whether or not this fund will hold up well in a nasty bear market. Ultimately this is probably why most people get into alt funds ie: participate somewhat in rising markets but to not get soaked when they decline. I realize that this could also be achieved by mixed stock/bond portfolios and I also own a fair chunk of Wellesely for precisely this reason; but it is not impossible for both stocks and bonds to decline in tandem. QSPIX represents another arrow in the quiver of diversification and it's possible that its true worth has not really been tested yet.
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Re: Why is QSPIX steadily declining?

Post by Toons »

Gravity
:happy
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Re: Why is QSPIX steadily declining?

Post by lack_ey »

Toons wrote: Sun Oct 29, 2017 12:40 pm Gravity
:happy
Oh dear, gravity works in mysterious ways.

Image

The thing that always jumps out to me in return graphs is how different the return for US and ex-US can be over any period even with the unmistakably very high correlation.

For reference, if you didn't catch it, the thread was started a while back. Actually, even looking at inception to mid-late 2016 that would be one of the most successful alternative mutual fund runs ever, never mind if you look at performance through today. But any way you look at it, about an 8.4% annualized nominal return, some 8.1-8.2% above the risk-free rate after fees and trading costs is unusual for any market neutral-type mid-term trading strategy, especially one with billions of dollars in AUM (over $4B in the mutual fund, plenty more billions in the institutional version). That's a bit better than even the fund managers expected, and everybody assumed that was likely optimistic.

It's probably a bit of a lucky break to start.
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Re: Why is QSPIX steadily declining?

Post by SpaceCowboy »

Wow up 1.57% today is a sideways market. I have no idea why, but I'm enjoying the ride. :happy
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Re: Why is QSPIX steadily declining?

Post by nisiprius »

lack_ey wrote: Tue Oct 24, 2017 10:14 pm...Maybe this should be another thread. If somebody wants to create it, please do. Otherwise, maybe I will tomorrow or something...
By all means do it. Or, I'd be interested in someone trying to do some kind of grand overview of AQR's mutual fund family, in general. I was disappointed that Larry Swedroe really was focussed on QSPIX specifically and sidestepped occasional questions about their other funds. AQR obviously has some kind of recognizable house style and house philosophy.
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Why WAS QSPIX steadily declining (currently, it's rising)

Post by nisiprius »

Somebody really ought to edit the thread title. I believe I will report the thread to the moderators and ask them to do it. As it stands, it's inaccurate information. The original poster, taojaxx, hasn't posted since May so I'm going to assume he's not following the thread.

Even the (meaningless) price per share has been climbing for the last six months.

(Added 7/5/2020) Well, in the light of subsequent performance, the original thread title is reasonably accurate now.
Last edited by nisiprius on Sun Jul 05, 2020 8:30 pm, edited 1 time in total.
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Re: Why [was] QSPIX steadily declining?

Post by LadyGeek »

nisiprius wrote: Thu Nov 02, 2017 5:42 am Somebody really ought to edit the thread title. I believe I will report the thread to the moderators and ask them to do it. As it stands, it's inaccurate information. The original poster, taojaxx, hasn't posted since May so I'm going to assume he's not following the thread.
Report received, thanks. I modified the thread title to "Why [was] QSPIX steadily declining?"
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Re: Why [was] QSPIX steadily declining?

Post by SpaceCowboy »

Resurrecting an old thread, but does anyone have a clue as to why QSPIX had such a terrible month in May 2018? It's off about 5% for the month and the year. Certainly continues to be uncorrelated, but I'm not sure why it had such a steep drop in the month.
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Re: Why [was] QSPIX steadily declining?

Post by zaboomafoozarg »

SpaceCowboy wrote: Sun Jun 03, 2018 4:11 pm Resurrecting an old thread, but does anyone have a clue as to why QSPIX had such a terrible month in May 2018? It's off about 5% for the month and the year. Certainly continues to be uncorrelated, but I'm not sure why it had such a steep drop in the month.
Not sure, I just noticed today that the drop has been over 10% since January. The high point was actually the day that I rebalanced into QSPIX... guess I should've warned to everyone :D
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Re: Why [was] QSPIX steadily declining?

Post by grok87 »

i"m also interested in this. maybe someone can do a factor attribution analysis.
main point is that the fund is very leveraged. check out qslix for a less leveraged version or vasfx for an even less leveraged option.
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Re: Why [was] QSPIX steadily declining?

Post by SpaceCowboy »

I haven’t seen a recent attribution analysis. However, the carry trade was probably negative. Momentum should have been positive. Unclear to me why the drop has been so dramatic. Anyone in touch with Larry who might have some insight?
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Re: Why [was] QSPIX steadily declining?

Post by matjen »

Although not as good as a report from Larry Swedroe, this probably includes much of the info that is relevant.

Value has struggled but then so has Momentum recently. Gonna have a bad time when that happens at the same time.

Stocks Quants Are Reeling From the Worst Run in 8 Years
One reason: factors that tend to move in the opposite direction failed to offset each other, dropping in unison last month. A market-neutral version of value -- which bets on companies priced cheaply while offsetting the broader market -- rounded off its worst quarter since 2011. Meanwhile, momentum, which bets on the highest fliers like tech stocks, saw its biggest monthly drawdown in more than two years.
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Re: Why [was] QSPIX steadily declining?

Post by grok87 »

matjen wrote: Thu Jul 12, 2018 7:23 am Although not as good as a report from Larry Swedroe, this probably includes much of the info that is relevant.

Value has struggled but then so has Momentum recently. Gonna have a bad time when that happens at the same time.

Stocks Quants Are Reeling From the Worst Run in 8 Years
One reason: factors that tend to move in the opposite direction failed to offset each other, dropping in unison last month. A market-neutral version of value -- which bets on companies priced cheaply while offsetting the broader market -- rounded off its worst quarter since 2011. Meanwhile, momentum, which bets on the highest fliers like tech stocks, saw its biggest monthly drawdown in more than two years.
https://www.bloomberg.com/news/articles ... gn=markets
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Re: Why [was] QSPIX steadily declining?

Post by SpaceCowboy »

Actually momentum has done fine this year. Value has struggled. Carry has also not done well with the steepening of the yiel curve.
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Re: Why [was] QSPIX steadily declining?

Post by grok87 »

Anyone know what the momentum factor returns for q1 and q2 of this year were.
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Re: Why [was] QSPIX steadily declining?

Post by SpaceCowboy »

grok87 wrote: Sun Jul 15, 2018 3:21 pm Anyone know what the momentum factor returns for q1 and q2 of this year were.
Per the S&P report linked above YTD +8.86% Q2 +5.29%
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Re: Why [was] QSPIX steadily declining?

Post by SpaceCowboy »

Well the QSPIX q2 performance attribution report is out and the reason for the decline is the Value factor. The fund lost 12.6% through loading on the value factor. Carry was the most positive factor with a gain of 3.4%
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Re: Why [was] QSPIX steadily declining?

Post by grok87 »

SpaceCowboy wrote: Sun Jul 22, 2018 11:55 am Well the QSPIX q2 performance attribution report is out and the reason for the decline is the Value factor. The fund lost 12.6% through loading on the value factor. Carry was the most positive factor with a gain of 3.4%
thanks. the value factor for stocks, HML, was about -3.5% for the quarter i think. Most of the 12.6% is probably due to QSPIX's use of leverage I think...

Value stocks are already pretty leveraged i think. Can someone remind me of why we need to leverage them up even further by using leverage at the fund level?
:)
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Re: Why [was] QSPIX steadily declining?

Post by InertiaMan »

Anyone see the Q3 report yet?
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Re: Why [was] QSPIX steadily declining?

Post by taojaxx »

Returning to this, interesting that since someone felt the need to change the thread title, the Fund started an uninterrupted descent lasting the best part of two years.Currently ER 2.32%, Yield 1.01%, YTD -4.66%, -21% since the title change. The price of diversification.
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Re: Why [was] QSPIX steadily declining?

Post by nedsaid »

grok87 wrote: Sun Jul 22, 2018 2:07 pm
SpaceCowboy wrote: Sun Jul 22, 2018 11:55 am Well the QSPIX q2 performance attribution report is out and the reason for the decline is the Value factor. The fund lost 12.6% through loading on the value factor. Carry was the most positive factor with a gain of 3.4%
thanks. the value factor for stocks, HML, was about -3.5% for the quarter i think. Most of the 12.6% is probably due to QSPIX's use of leverage I think...

Value stocks are already pretty leveraged i think. Can someone remind me of why we need to leverage them up even further by using leverage at the fund level?
:)
cheers,
grok
I also don't like the market neutral approach to Value as Value has had positive returns but has trailed the broad stock market. A strategy that turns gains into losses. Adding leverage to that magnifies the effect. Looked great on paper but hasn't worked out lately.
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Re: Why [was] QSPIX steadily declining?

Post by typical.investor »

taojaxx wrote: Sat Oct 12, 2019 9:45 pm Returning to this, interesting that since someone felt the need to change the thread title, the Fund started an uninterrupted descent lasting the best part of two years.Currently ER 2.32%, Yield 1.01%, YTD -4.66%, -21% since the title change. The price of diversification.
The title change is interesting. The “U.S. stocks in free fall” thread never gets changed, but who needs consistency if you are trying to manage perceptions.

Anyway QSPIX seems extremely volatile and much more correlated to the US market than it’s US 3 month treasury bill index. People complain returns shouldn’t be compared to stocks, but it doesn’t seem like the index is a good fit either.

Anyway, I had FOMO (fear of missing out) when this fund was being all talked up. Now, not so much.

Maybe the value factor will do well when if inflation starts to rise globally though. In the meantime, I’m happy with simpler leveraged bond funds.
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Re: Why [was] QSPIX steadily declining?

Post by taojaxx »

Just resurrecting this for a minute. Didn't get an answer to my question, only a title change ("was" substituted to "is").
Looks like reinstating the original title is long overdue.
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Re: Why [was] QSPIX steadily declining?

Post by SpaceCowboy »

taojaxx wrote: Sat May 23, 2020 1:03 pm Just resurrecting this for a minute. Didn't get an answer to my question, only a title change ("was" substituted to "is").
Looks like reinstating the original title is long overdue.
:happy
I haven’t seen the latest performance attribution reports, but I think value is still weighing against this fund. Growth has strongly outperformed value this year, so long value, short growth hasn’t produced a good result. Also the flattening of the yield curve has not helped the carry bet.
Overall Beta = 0 , but Alpha has been very negative, which is a big problem. It’s had a negative total return since inception.
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Re: Why [was] QSPIX steadily declining?

Post by nedsaid »

SpaceCowboy wrote: Sat Jul 04, 2020 10:45 am
taojaxx wrote: Sat May 23, 2020 1:03 pm Just resurrecting this for a minute. Didn't get an answer to my question, only a title change ("was" substituted to "is").
Looks like reinstating the original title is long overdue.
:happy
I haven’t seen the latest performance attribution reports, but I think value is still weighing against this fund. Growth has strongly outperformed value this year, so long value, short growth hasn’t produced a good result. Also the flattening of the yield curve has not helped the carry bet.
Overall Beta = 0 , but Alpha has been very negative, which is a big problem. It’s had a negative total return since inception.
My best guess is that Value is the main culprit.
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Re: Why [was] QSPIX steadily declining?

Post by afan »

Whoever started the other thread was right about one thing: this fund has been "interesting"
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Re: Why [was] QSPIX steadily declining?

Post by taojaxx »

Not sure why that is but all (or most) AQR Funds have subpar performance dating back early 2018. Does not reflect well on Cliff Asness who's otherwise a very sensible guy.
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Re: Why [was] QSPIX steadily declining?

Post by typical.investor »

taojaxx wrote: Sat Jul 04, 2020 10:21 pm Not sure why that is but all (or most) AQR Funds have subpar performance dating back early 2018. Does not reflect well on Cliff Asness who's otherwise a very sensible guy.
I heard Cliff in an interview saying the past couple of years in particular have seen pricing deviate from fundamentals. Research Affiliates seems to say the same thing - the stocks that have been doing well have done so by getting more expensive.

I mean of course those expensive stocks could see profitability in the future increase, and perhaps that is what investors are expecting. So nothing to say the most expensive stocks aren't the best bet (unless you look at how that's worked historically).

In any case, value has not done well. Not sure why momentum isn't helping AQR, but I've not seen a good AQR mom fund. Is it their implementation? I don't know. If they are choosing stocks with good momentum that also load on value, maybe their selections are missing the expensive funds really showing momentum.

Anyway, Research Affiliates has done some good work on how extremely factors can deviate from a normal distribution and how their correlations can rise.

So I can't tell if AQR is not capturing their targeted factor returns or that is what the returns are. iShare MOM seems to have done, but then some say it's just really megacap growth and not mom.

I don't really doubt factor investing, I only doubt if my timeline will correspond with factor returns (even with factor diversification) and I doubt my ability to evaluate who has a good implementation to capture the factors.

Will value ever come back if inflation doesn't? Will it happen in my horizon?
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Re: Why [was] QSPIX steadily declining?

Post by nisiprius »

typical.investor wrote: Sat Jul 04, 2020 10:40 pm...I heard Cliff in an interview saying the past couple of years in particular have seen pricing deviate from fundamentals...
Nice alibi.

Like the standard language in "chairman's comments" in any mutual fund semiannual report when it has done badly, that amount to "the reason why the fund did poorly over the last six months is that the things we invested in did poorly over the last six months."

The original post in this thread was made on 9/17/2017. QSPIX was actually rising for a few months, but QSPIX has been steadily declining" is a reasonable summary of performance since 1/1/2018. And the cumulative loss is now more than $3,000 on a $10,000 investment, i.e. a lost of more than 30% in three years, an average CAGR of -12.7% per year. While the category average lost only -0.21%/year and the fund's own self-chosen benchmark average made 1.83%/year.

And it really has been steady, and was "steadily declining" even before the pandemic.

Source

Image
Last edited by nisiprius on Sun Jul 05, 2020 8:32 pm, edited 2 times in total.
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Re: Why [was] QSPIX steadily declining?

Post by Robert T »

.
Decide on long-term portfolio factor exposure targets
Choose funds to achieve these at lowest (total) cost
Stay the course

Arguably the following two portfolios are similar:

Portfolio 1 – with exposure to value/momentum/quality through long-short
  • 60% iShares MSCI All Cap World Index (ACWI)
    10% Vanguard Total Bond Market Index (VBMFX)
    30% AQR Style Premia Alternative (QSPIX)
Portfolio 2 – with exposure to value/momentum/quality through long-only
  • 30% AQR Large Cap Multi-Style (QCELX)
    22% AQR International Multi-Style (QICLX)
    8% AQR Emerging Multi-Style (QEELX)
    40% Vanguard Total Bond Market Index (VBMFX)
Both are 60% stock (beta exposure) with similar US:Non-US Developed:EM exposure
30% of the first portfolio has exposure to quality/value/momentum though long-short. 60% of second portfolio has exposure to quality/value/momentum though long only. (as 30% x 1 [long-short] = 60% x 0.5 [long only] exposure to these factors should be similar). Now some will say what about carry, what about other non-stock assets in QSPIX. Well these haven’t made much of a difference so far. There is arguably a bigger term (and perhaps credit/default) difference between the two portfolios. Nevertheless returns to date have been similar, more so if you account for expense ratio differences.

Annualized return (%) /Sharpe ratio: June 2014-June 2020
  • Portfolio 1: 3.36/0.32
    Portfolio 2: 3.78/0.38
Expense ratio
  • Portfolio 1: 0.67
    Portfolio 2: 0.35
Following the above, for those targeting a moderate tilt to value/moment/quality there does not seem to be anything inherently special about QSPIX relative to alternatives (at least so far). And the alternatives are likely lower cost (lower portfolio expense ratio and taxes).

https://www.portfoliovisualizer.com/bac ... tion6_1=30
.
wickywack
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Re: Why [was] QSPIX steadily declining?

Post by wickywack »

Robert T wrote: Sun Jul 05, 2020 8:18 am .
Decide on long-term portfolio factor exposure targets
Choose funds to achieve these at lowest (total) cost
Stay the course

Arguably the following two portfolios are similar:

Portfolio 1 – with exposure to value/momentum/quality through long-short
  • 60% iShares MSCI All Cap World Index (ACWI)
    10% Vanguard Total Bond Market Index (VBMFX)
    30% AQR Style Premia Alternative (QSPIX)
Portfolio 2 – with exposure to value/momentum/quality through long-only
  • 30% AQR Large Cap Multi-Style (QCELX)
    22% AQR International Multi-Style (QICLX)
    8% AQR Emerging Multi-Style (QEELX)
    40% Vanguard Total Bond Market Index (VBMFX)
Both are 60% stock (beta exposure) with similar US:Non-US Developed:EM exposure
30% of the first portfolio has exposure to quality/value/momentum though long-short. 60% of second portfolio has exposure to quality/value/momentum though long only. (as 30% x 1 [long-short] = 60% x 0.5 [long only] exposure to these factors should be similar). Now some will say what about carry, what about other non-stock assets in QSPIX. Well these haven’t made much of a difference so far. There is arguably a bigger term (and perhaps credit/default) difference between the two portfolios. Nevertheless returns to date have been similar, more so if you account for expense ratio differences.

Annualized return (%) /Sharpe ratio: June 2014-June 2020
  • Portfolio 1: 3.36/0.32
    Portfolio 2: 3.78/0.38
Expense ratio
  • Portfolio 1: 0.67
    Portfolio 2: 0.35
Following the above, for those targeting a moderate tilt to value/moment/quality there does not seem to be anything inherently special about QSPIX relative to alternatives (at least so far). And the alternatives are likely lower cost (lower portfolio expense ratio and taxes).

https://www.portfoliovisualizer.com/bac ... tion6_1=30
.
Given your link, these portfolios don't appear particularly similar - at least not in terms of their difference from a vanilla 60/40 portfolio (your portfolio #3). The first two portfolios outperform and underperform portfolio #3 at different times. For the vast majority of the past 6 years, portfolio #1 was ahead of #2.

Or, to put it differently, my eyes can't tell whether portfolios #1 and #2 are more similar to each other than either are to #3.

Are they really tilting to the same factors? How do you tell that they are doing so faithfully and/or effectively? How do you tell whether the factors themselves are underperforming vs these funds inadequately implementing them?
CardioMD
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Re: Why [was] QSPIX steadily declining?

Post by CardioMD »

I must be incredibly simpleminded because this looks like a really expensive (1.83%) dumpster fire of a fund. Ouch. Further proof that I should keep it simple and enjoy the market return. I’ll show myself to the door.
“The stock market is a giant distraction from the business of investing.” -Jack Bogle
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tarheel
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Re: Why [was] QSPIX steadily declining?

Post by tarheel »

No question the fund has hit a rough patch, but it all depends on what your timeframe is and if you understand what you're investing in. Those of us with a reasonable allocation to QSPIX (I'm at 7.5%) are usually factor investing lifers who appreciate what the fund aims to do. It is now at what must be all-time lows. I just bought quite a bit at the end of last month.

As for recent performance, you'd have to ask someone who gets the attribution analysis updates but it surely has something to do with value underperformance as others have suggested.
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Re: Why [was] QSPIX steadily declining?

Post by nisiprius »

tarheel wrote: Sun Jul 05, 2020 12:29 pm...As for recent performance, you'd have to ask someone who gets the attribution analysis updates but it surely has something to do with value underperformance as others have suggested.
AQR chooses to list this fund among its "alternatives" fund, not among its "equities fund." (Specifically, "alternatives, multistrategy.") Why would an investor expect value underperformance to matter in an "alternatives" fund?
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Re: Why [was] QSPIX steadily declining?

Post by SpaceCowboy »

nisiprius wrote: Sun Jul 05, 2020 1:31 pm
tarheel wrote: Sun Jul 05, 2020 12:29 pm...As for recent performance, you'd have to ask someone who gets the attribution analysis updates but it surely has something to do with value underperformance as others have suggested.
AQR chooses to list this fund among its "alternatives" fund, not among its "equities fund." (Specifically, "alternatives, multistrategy.") Why would an investor expect value underperformance to matter in an "alternatives" fund?
The fund is heavily factor loaded. It has beta=0 exposure by going short and long positions. Value, defensive stocks, carry, momentum are all factors that the fund has positive exposure to.
2 of the 5 asset classes are equities - equity indices and stocks & industries. The other 3 asset classes are - currencies, commodities and fixed income
Thus it it exposed to the equity value factor, which has heavily contributed to its underperformance
wickywack
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Re: Why [was] QSPIX steadily declining?

Post by wickywack »

SpaceCowboy wrote: Sun Jul 05, 2020 1:48 pm
nisiprius wrote: Sun Jul 05, 2020 1:31 pm
tarheel wrote: Sun Jul 05, 2020 12:29 pm...As for recent performance, you'd have to ask someone who gets the attribution analysis updates but it surely has something to do with value underperformance as others have suggested.
AQR chooses to list this fund among its "alternatives" fund, not among its "equities fund." (Specifically, "alternatives, multistrategy.") Why would an investor expect value underperformance to matter in an "alternatives" fund?
The fund is heavily factor loaded. It has beta=0 exposure by going short and long positions. Value, defensive stocks, carry, momentum are all factors that the fund has positive exposure to.
2 of the 5 asset classes are equities - equity indices and stocks & industries. The other 3 asset classes are - currencies, commodities and fixed income
Thus it it exposed to the equity value factor, which has heavily contributed to its underperformance
Assuming equal balance, equity value would be 1/10 of the fund then. That doesn't seem big enough to heavily contribute. Are folks just guessing this is due to value or is there clear data?
SpaceCowboy
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Re: Why [was] QSPIX steadily declining?

Post by SpaceCowboy »

AQR does a quarterly attribution analysis, but it is not publicly available. It's only available to RIAs. So any friendly financial advisors want to share?
wickywack
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Re: Why [was] QSPIX steadily declining?

Post by wickywack »

SpaceCowboy wrote: Sun Jul 05, 2020 4:30 pm AQR does a quarterly attribution analysis, but it is not publicly available. It's only available to RIAs. So any friendly financial advisors want to share?
Interesting - is this sort of opacity common?

I don't mean to beat a dead horse. I'm curious what signals folks use to keep investing. I don't invest in this, but I do invest in other things that have hit rough patches:

* International. I have surprisingly little regret here. If I was starting anew, with what I know now, I'd still invest in international at about the same rate. I don't see a fundamental reason for US to outperform. The fund I invest in (mostly VTIAX) seems to track its index, so I have no inclination to change.

* Value. I tilt small-cap value, and I do have some regret here to be honest. My belief in the value premium (or one that will show in my lifetime) isn't that strong. Still, I don't see any reason for a *negative* premium, so I'm inclined to stay the course. The funds I invest in (mostly VSIAX) are cheap and track their indices, so I can stick with them. If I was starting anew, I don't think I'd tilt here.

In contrast, I think I'd have a much harder time with something as opaque as QSPIX. It's hard to tell how much of its underperformance is strategy rough patch vs fees / implementation difficulties.
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Re: Why [was] QSPIX steadily declining?

Post by DaufuskieNate »

wickywack wrote: Mon Jul 06, 2020 8:33 am
SpaceCowboy wrote: Sun Jul 05, 2020 4:30 pm AQR does a quarterly attribution analysis, but it is not publicly available. It's only available to RIAs. So any friendly financial advisors want to share?
Interesting - is this sort of opacity common?

I don't mean to beat a dead horse. I'm curious what signals folks use to keep investing. I don't invest in this, but I do invest in other things that have hit rough patches:

* International. I have surprisingly little regret here. If I was starting anew, with what I know now, I'd still invest in international at about the same rate. I don't see a fundamental reason for US to outperform. The fund I invest in (mostly VTIAX) seems to track its index, so I have no inclination to change.

* Value. I tilt small-cap value, and I do have some regret here to be honest. My belief in the value premium (or one that will show in my lifetime) isn't that strong. Still, I don't see any reason for a *negative* premium, so I'm inclined to stay the course. The funds I invest in (mostly VSIAX) are cheap and track their indices, so I can stick with them. If I was starting anew, I don't think I'd tilt here.

In contrast, I think I'd have a much harder time with something as opaque as QSPIX. It's hard to tell how much of its underperformance is strategy rough patch vs fees / implementation difficulties.
In my experience, RIAs don't even share the AQR quarterly attribution report with their clients. I think it speaks to the fact that AQR views institutions and RIAs as their customers. Retail investors, not so much.
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Re: Why [was] QSPIX steadily declining?

Post by Random Walker »

tarheel wrote: Sun Jul 05, 2020 12:29 pm No question the fund has hit a rough patch, but it all depends on what your timeframe is and if you understand what you're investing in. Those of us with a reasonable allocation to QSPIX (I'm at 7.5%) are usually factor investing lifers who appreciate what the fund aims to do. It is now at what must be all-time lows. I just bought quite a bit at the end of last month.

As for recent performance, you'd have to ask someone who gets the attribution analysis updates but it surely has something to do with value underperformance as others have suggested.
Totally agree with above. Moreover, one needs to appreciate what he is trying to accomplish with the fund. And that is intimately related to where the allocation to the fund is coming from. If the QSPIX allocation is coming from bonds, the investor is looking for increased expected return, increased portfolio volatility to a lesser extent, more efficient portfolio. If the QSPIX allocation is coming from equities, the investor is looking for similar portfolio returns, lower volatility, increased portfolio efficiency. I agree that benchmarking to treasury bills doesn’t make a lot of sense to me. With something like 4 styles and 6 asset classes, it’s really it’s own unique beast.

Dave
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