Investing in AQR funds

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bogleface99
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Investing in AQR funds

Post by bogleface99 » Thu Jan 04, 2018 8:44 pm

Finished reading the main part of Larry Swedroe's "Your Complete Guide to Factor Based Investing". Some of the suggested funds are AQR funds. How do you access these? Thanks.

lack_ey
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Re: Investing in AQR funds

Post by lack_ey » Thu Jan 04, 2018 8:57 pm

You invest with an investment advisory firm that has access (like his).

Okay, other than that, a number of brokerages have some of the funds available. Some allow access at lower minimums than advertised (no uncommon in the brokerage/fund industry). For example Fidelity in IRAs but not taxable brokerage accounts has a number of the funds with a $2,500 minimum, but that's only on N shares that include a 0.25% 12b-1 fee, making the funds even more expensive. None of the cheaper I or R6 shares.

In any case, for a number of categories, they're not the only ones with funds covering those things or at least something similar. The book isn't exhaustive in terms of listing everything available.

betablocker
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Re: Investing in AQR funds

Post by betablocker » Thu Jan 04, 2018 9:11 pm

Many people use FPL capital. They have a very low cost option with access to many of the funds Larry references.

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Taylor Larimore
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Re: Investing in AQR funds /

Post by Taylor Larimore » Thu Jan 04, 2018 9:26 pm

bogleface99:

You may be interested in this study of AQR funds:

AQR: A deeper look at the performance

Past performance does not forecast future performance.

Best wishes.
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle

lack_ey
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Re: Investing in AQR funds

Post by lack_ey » Thu Jan 04, 2018 9:46 pm

Taylor Larimore wrote:
Thu Jan 04, 2018 9:26 pm
bogleface99:

You may be interested in this study of AQR funds:

AQR: A deeper look at the performance

Past performance does not forecast future performance.

Best wishes.
Taylor
Can anybody explain to me why they're benchmarking market neutral funds against Morningstar's moderate allocation benchmark and showing alpha and t-stats for alpha for that comparison? Or for that matter, a long-short fund with equity market beta around 0.5 to global stocks to the S&P 500? Inexplicably they seem to have omitted a lot of the funds, including the equity market neutral fund. I don't really get it.

It's pretty clear to anybody who's taken a look that a lot of the funds have not been particularly successful in the short histories available, either by comparison to Morningstar's benchmark, or looking at alpha either 3-factor or actually using a model that includes the factor being explicitly targeted. But I'm wondering what's going on with this a-bit-below-the-surface "deeper look" that seems to have a number of issues and omissions.

They do run a 3-factor regression but only for two funds, which is kind of ???

I guess if they're using the same methodology as for other fund companies, there's consistency there. But seriously, take a look and see if this categorization makes sense (this an example of a multi-asset market neutral fund being compared to the Morningstar moderate allocation category, with some other funds for reference):

Image

No matter what you think about the underlying funds or this specific one when it comes to risk, expenses, strategy, or anything else, there's absolutely no way you look at the returns and think to yourself, "wow, what a great fit—I think this makes so much sense to look at alpha for the fund relative to this Morningstar category."

For reference, IFA uses DFA funds. I thought DFA chose advisors to work with and had all kinds of informational sessions. I guess that doesn't prevent this kind of shoddy work.

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bogleface99
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Re: Investing in AQR funds

Post by bogleface99 » Fri Jan 05, 2018 3:16 pm

Thanks for the responses so far.

wije
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Re: Investing in AQR funds

Post by wije » Fri Jan 05, 2018 5:12 pm

lack_ey wrote:
Thu Jan 04, 2018 9:46 pm
Can anybody explain to me why they're benchmarking market neutral funds against Morningstar's moderate allocation benchmark and showing alpha and t-stats for alpha for that comparison?
I'm neither Taylor nor IFA, but perhaps they're criticizing the very idea of market neutral funds.

lack_ey
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Re: Investing in AQR funds

Post by lack_ey » Fri Jan 05, 2018 6:49 pm

wije wrote:
Fri Jan 05, 2018 5:12 pm
lack_ey wrote:
Thu Jan 04, 2018 9:46 pm
Can anybody explain to me why they're benchmarking market neutral funds against Morningstar's moderate allocation benchmark and showing alpha and t-stats for alpha for that comparison?
I'm neither Taylor nor IFA, but perhaps they're criticizing the very idea of market neutral funds.
That doesn't seem to follow from the language used. In fact, under the "regression analysis" section they seem to understand the limitations of using the Morningstar category.

They're just using whichever Morningstar benchmark is assigned to the fund. In some sense this is fair, as it relies on an impartial 3rd-party source. But there's an acknowledged problem in theory of this not necessarily fitting very well. However, when faced with extremely glaring cases here where the match doesn't remotely make sense, but there's no mention of that in the article. That kind of omission is some kind of carelessness and incompetence (not actually sanity checking, or not realizing something is amiss), or deliberate obfuscation. If they're worried about long-only momentum stock funds not quite matching their Morningstar stock category benchmarks, it stands to reason that complete mismatches would be addressed—If not quantitatively, then at least in words.

As evidence against it being deliberate, look at AQR Diversified Arbitrage Fund (ADAIX). That runs some traditional hedge fund strategies, namely merger arbitrage (long a stock going to be acquired as it's trading under the deal price, short the acquirer's stock), convertible arbitrage, and some other corporate event-driven strategies (e.g. long Yahoo and short Alibaba back when Yahoo was trying to get rid of its ownership stake in Alibaba). It's effectively close to market neutral, doing pair trades, and is benchmarked against 3-month T-bills here. for what it's worth, if you regress on its return, it's had an equity market beta around 0.05 to 0.1, higher than that of other funds IFA is benchmarking against Morningstar's moderate allocation category.

For whatever reason they look at I shares of every fund, except N shares (which add a 0.25% 12b-1 fee) for one of them. All of the funds offered have the same three share classes.

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whodidntante
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Re: Investing in AQR funds

Post by whodidntante » Fri Jan 05, 2018 7:09 pm

One poster here indicated his HSA allowed the purchase of AQR funds. You can probably find that by searching.

cashcows
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Re: Investing in AQR funds

Post by cashcows » Sat Mar 10, 2018 1:49 pm

betablocker wrote:
Thu Jan 04, 2018 9:11 pm
Many people use FPL capital. They have a very low cost option with access to many of the funds Larry references.
I don't see any of the Stone Ridge funds listed at FPL. Am I missing it somewhere?

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GreatOdinsRaven
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Re: Investing in AQR funds

Post by GreatOdinsRaven » Sun Mar 11, 2018 1:12 am

cashcows wrote:
Sat Mar 10, 2018 1:49 pm
betablocker wrote:
Thu Jan 04, 2018 9:11 pm
Many people use FPL capital. They have a very low cost option with access to many of the funds Larry references.
I don't see any of the Stone Ridge funds listed at FPL. Am I missing it somewhere?
I have used FPL for two years (only for DFA and AQR) and I'm very happy. Stone Ridge is mentioned here:

I use Vanguard Brokerage for my Vanguard and iShares funds (much cheaper to buy Blackrock ETFs at Vanguard and of course Vanguard ETFs are always free at Vanguard...)

GOR
"The greatest enemies of the equity investor are expenses and emotions." -John C. Bogle, Little Book of Common Sense Investing. | | "Winter is coming." Lord Eddard Stark.

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