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Discuss all general (i.e. non-personal) investing questions and issues, investing news, and theory.
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hdas
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Post by hdas » Wed Jan 09, 2019 9:10 pm

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HippoSir
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Re: AQR Cuts Staff After a Bad Year

Post by HippoSir » Wed Jan 09, 2019 10:12 pm

I wonder how much of this is poor performance and how much of it is credible, cheaper, and potentially even better constructed alternatives coming from Vanguard/Blackrock/etc (at least in terms of their factor funds).

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Re: AQR Cuts Staff After a Bad Year

Post by columbia » Thu Jan 10, 2019 6:38 am

Are they questionable at what they do or is what they do just questionable?
If you leave your head in the sand for too long, you might get run over by a Jeep.

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Re: AQR Cuts Staff After a Bad Year

Post by rkhusky » Thu Jan 10, 2019 8:43 am

hdas wrote:
Thu Jan 10, 2019 8:38 am
AQR’s U.S. mutual funds had outflows of $5 billion in the first 11 months of 2018, according to data from Morningstar Inc.
Must be people who missed the part about sticking with a factor or alternative strategy through 10 or 20 years of under-performance. Probably thought they could make a quick buck off a new hot strategy based on a lot of fancy math.

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Re: AQR Cuts Staff After a Bad Year

Post by RNJ » Thu Jan 10, 2019 8:55 am

Performance aside, I wonder how many AQR investors really understood the nature of the investments.

Isn't this about what one would expect from this fund over longer time periods?

[Image link removed by Moderator Misenplace]

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Re: AQR Cuts Staff After a Bad Year

Post by columbia » Thu Jan 10, 2019 9:36 am

RNJ wrote:
Thu Jan 10, 2019 8:55 am
Performance aside, I wonder how many AQR investors really understood the nature of the investments.

Isn't this about what one would expect from this fund over longer time periods?

[Image link removed by Moderator Misenplace]
QSPIX owners would have been better off with Wellesley:
https://www.portfoliovisualizer.com/bac ... ion2_2=100
If you leave your head in the sand for too long, you might get run over by a Jeep.

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hdas
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Re: AQR Cuts Staff After a Bad Year

Post by HomerJ » Thu Jan 10, 2019 9:50 am

hdas wrote:
Thu Jan 10, 2019 9:40 am
rkhusky wrote:
Thu Jan 10, 2019 8:43 am
hdas wrote:
Thu Jan 10, 2019 8:38 am
AQR’s U.S. mutual funds had outflows of $5 billion in the first 11 months of 2018, according to data from Morningstar Inc.
Must be people who missed the part about sticking with a factor or alternative strategy through 10 or 20 years of under-performance. Probably thought they could make a quick buck off a new hot strategy based on a lot of fancy math.
Why would they stick to something that it's going to change it's implementation midway anyways? See here

Regarding the Risk Parity debacle:
Starting January 30, 2019, the fund will change its name to the AQR Multi-Asset fund to reflect a shift in investment strategy.

As a result of the changes the fund will be able to gain equity exposure and engage in security selection through specific names as opposed to only through derivatives.

In addition, the fund will have greater flexibility in how it allocates money across various asset classes.

Whereas the fund previously sought ‘to balance the allocation of risk across asset classes,’ it will now allocate assets in a way that ‘avoids excessive risk exposure to any single asset class (e.g., equities, bonds, commodities) or risk premium (e.g., equity risk, duration risk, currency risk),’ according to the filing.
AQR losing money one year is no big deal. People pulling money out is normal after a bad year. AQR having to lay off people because of all the redemptions is not great, but understandable.

AQR changing their models and implementation (of only one fund so far) is HUGE. That means they don't have faith in at least one of their models anymore, and what they are SELLING is faith in their super-quant super-math super-tested-historically models
A Goldman Sachs associate provided a variety of detailed explanations, but then offered a caveat, “If I’m being dead-### honest, though, nobody knows what’s really going on.”

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Re: AQR Cuts Staff After a Bad Year

Post by marcopolo » Thu Jan 10, 2019 10:00 am

HomerJ wrote:
Thu Jan 10, 2019 9:50 am
hdas wrote:
Thu Jan 10, 2019 9:40 am
rkhusky wrote:
Thu Jan 10, 2019 8:43 am
hdas wrote:
Thu Jan 10, 2019 8:38 am
AQR’s U.S. mutual funds had outflows of $5 billion in the first 11 months of 2018, according to data from Morningstar Inc.
Must be people who missed the part about sticking with a factor or alternative strategy through 10 or 20 years of under-performance. Probably thought they could make a quick buck off a new hot strategy based on a lot of fancy math.
Why would they stick to something that it's going to change it's implementation midway anyways? See here

Regarding the Risk Parity debacle:
Starting January 30, 2019, the fund will change its name to the AQR Multi-Asset fund to reflect a shift in investment strategy.

As a result of the changes the fund will be able to gain equity exposure and engage in security selection through specific names as opposed to only through derivatives.

In addition, the fund will have greater flexibility in how it allocates money across various asset classes.

Whereas the fund previously sought ‘to balance the allocation of risk across asset classes,’ it will now allocate assets in a way that ‘avoids excessive risk exposure to any single asset class (e.g., equities, bonds, commodities) or risk premium (e.g., equity risk, duration risk, currency risk),’ according to the filing.
AQR losing money one year is no big deal. People pulling money out is normal after a bad year. AQR having to lay off people because of all the redemptions is not great, but understandable.

AQR changing their models and implementation (of only one fund so far) is HUGE. That means they don't have faith in at least one of their models anymore, and what they are SELLING is faith in their super-quant super-math super-tested-historically models
Interesting. I wonder if people are going to continue to assert that these are really passive funds.
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Re: AQR Cuts Staff After a Bad Year

Post by nisiprius » Thu Jan 10, 2019 10:20 am

marcopolo wrote:
Thu Jan 10, 2019 10:00 am
Interesting. I wonder if people are going to continue to assert that these are really passive funds.
I predict that people who say they advocate "passive investing," and also advocate the use of some of these funds, will continue to assert that those funds they advocate are "passive."
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Re: AQR Cuts Staff After a Bad Year

Post by aristotelian » Thu Jan 10, 2019 10:25 am

RNJ wrote:
Thu Jan 10, 2019 8:55 am
Performance aside, I wonder how many AQR investors really understood the nature of the investments.

Isn't this about what one would expect from this fund over longer time periods?

QSPIX in BLUE

Image
They are marketed as reducing portfolio volatility, and yet went down more than the market when it dropped.

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Re: AQR Cuts Staff After a Bad Year

Post by RNJ » Thu Jan 10, 2019 10:44 am

aristotelian wrote:
Thu Jan 10, 2019 10:25 am
RNJ wrote:
Thu Jan 10, 2019 8:55 am
Performance aside, I wonder how many AQR investors really understood the nature of the investments.

Isn't this about what one would expect from this fund over longer time periods?

QSPIX in BLUE

Image
They are marketed as reducing portfolio volatility, and yet went down more than the market when it dropped.
To be clear, I'm not advocating for the use of these funds or for AQR. I don't and wouldn't own them. My point was threefold: first, it's these are risk assets; second, for the factors to work for investors (in theory, anyway), they must be held for long periods of time; third, one of the functions of this particular fund is to have a low correlation to other asset classes. A PortfolioVisualuzer look at QSPIX vs short and intermediate treasuries and total stock market funds demonstrates that the fund fulfills that mandate.

Investors got what they signed up for (including high fees). They just may not have read or understood the fine print.

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Re: AQR Cuts Staff After a Bad Year (39 out of 41 funds down)

Post by nedsaid » Thu Jan 10, 2019 11:27 am

In fairness to AQR, 2018 was a bad year in the investment markets. Bonds barely were in the plus column and pretty much everything else other than cash was down. The AQR funds would have done better if they just sat in cash.
A fool and his money are good for business.

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Re: AQR Cuts Staff After a Bad Year (39 out of 41 funds down)

Post by greg24 » Thu Jan 10, 2019 11:50 am

nedsaid wrote:
Thu Jan 10, 2019 11:27 am
In fairness to AQR, 2018 was a bad year in the investment markets.
It was, but many of their super-fancy funds got destroyed by the old stodgy SP500 index fund by 10%.

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Re: AQR Cuts Staff After a Bad Year (39 out of 41 funds down)

Post by nedsaid » Thu Jan 10, 2019 11:58 am

greg24 wrote:
Thu Jan 10, 2019 11:50 am
nedsaid wrote:
Thu Jan 10, 2019 11:27 am
In fairness to AQR, 2018 was a bad year in the investment markets.
It was, but many of their super-fancy funds got destroyed by the old stodgy SP500 index fund by 10%.
What I will say is that volatile markets should have been a great opportunity for alt funds to show their stuff and the performance seemed pretty disappointing. It goes to show you that asset classes don't have to perform according to investor expectations, in the short run about anything can happen and it did.
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Re: AQR Cuts Staff After a Bad Year (39 out of 41 funds down)

Post by nisiprius » Thu Jan 10, 2019 12:00 pm

I have as much schadenfreude as the next guy, but don't see this as a big deal, and probably wouldn't have taken any particular notice of it if some people hadn't been so enthusiastic about certain AQR funds in this forum. On any given day if stocks went down and QSPIX/QSPRX/QSPNX went up, we had a tendency to hear about it.

I mean, I don't pay a lot of attention to other funds and fund companies if people aren't pushing them as better than Vanguard.

It probably wasn't good for Janus to become "Janus Henderson," I dunno... but I wouldn't have even noticed if I hadn't been looking to see how Bill Gross' new bond fund was doing.

How is it doing, by the way?

Source

Blue = JUCIX, Janus Henderson Global Unconstrained Bond Fund; manager, Bill Gross
Orange = VBTLX, Vanguard Total Bond Market Index Fund
Green = PTTRX, PIMCO Total Return Bond Fund, the one that investors dumped 2/3rds of when Bill Gross left it

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Post by hdas » Thu Jan 10, 2019 12:10 pm

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Re: AQR Cuts Staff After a Bad Year (39 out of 41 funds down)

Post by Tamalak » Thu Jan 10, 2019 12:16 pm

(39 out of 41 funds down)
3 out of 3 of my funds were down this year, so I'm in no position to throw stones at active investors :D

(I did not, however, lay off any of my 1 employees)
Last edited by Tamalak on Thu Jan 10, 2019 12:45 pm, edited 2 times in total.

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Re: AQR Cuts Staff After a Bad Year

Post by JBTX » Thu Jan 10, 2019 12:25 pm

HomerJ wrote:
Thu Jan 10, 2019 9:50 am
hdas wrote:
Thu Jan 10, 2019 9:40 am
rkhusky wrote:
Thu Jan 10, 2019 8:43 am
hdas wrote:
Thu Jan 10, 2019 8:38 am
AQR’s U.S. mutual funds had outflows of $5 billion in the first 11 months of 2018, according to data from Morningstar Inc.
Must be people who missed the part about sticking with a factor or alternative strategy through 10 or 20 years of under-performance. Probably thought they could make a quick buck off a new hot strategy based on a lot of fancy math.
Why would they stick to something that it's going to change it's implementation midway anyways? See here

Regarding the Risk Parity debacle:
Starting January 30, 2019, the fund will change its name to the AQR Multi-Asset fund to reflect a shift in investment strategy.

As a result of the changes the fund will be able to gain equity exposure and engage in security selection through specific names as opposed to only through derivatives.

In addition, the fund will have greater flexibility in how it allocates money across various asset classes.

Whereas the fund previously sought ‘to balance the allocation of risk across asset classes,’ it will now allocate assets in a way that ‘avoids excessive risk exposure to any single asset class (e.g., equities, bonds, commodities) or risk premium (e.g., equity risk, duration risk, currency risk),’ according to the filing.
AQR losing money one year is no big deal. People pulling money out is normal after a bad year. AQR having to lay off people because of all the redemptions is not great, but understandable.

AQR changing their models and implementation (of only one fund so far) is HUGE. That means they don't have faith in at least one of their models anymore, and what they are SELLING is faith in their super-quant super-math super-tested-historically models
Even if you buy into active funds, this is probably the final downfall. Inevitably any strategy will have down years, and when that happens there is pressure to change the strategy, and fund managers usually succumb to that pressure. Which begs the question as to why go with active in the first place if they can't stick with their supposedly superior strategy?

Having said all that having 39 or 41 funds down last year isn't unusual. Almost everythjng was down. I posted a thread a while ago that last year was one of the worst investing years ever, in terms of the breadth of investment categories (however you define them) that were down. I was reminded repeatedly that in absolute and relative terms the losses were historically moderate, which is definitely true, and definitely not the point of the referenced article.

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Re: AQR Cuts Staff After a Bad Year (39 out of 41 funds down)

Post by nisiprius » Thu Jan 10, 2019 12:25 pm

hdas wrote:
Thu Jan 10, 2019 12:10 pm
...2.) Don't you think it's significant that they sell something based on "robust evidence" and have to change it half way to something else like it's the case of the Risk Parity fund?...
Yes. Thanks for spotting that. I thought it was interesting.
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Re: AQR Cuts Staff After a Bad Year (39 out of 41 funds down)

Post by oneleaf » Thu Jan 10, 2019 12:37 pm

hdas wrote:
Thu Jan 10, 2019 12:10 pm
Fair enough, but 2 points:

1.) Those ppl don't have an army of apologist peddling their funds regardless of performance/fees in this forum and in the general press.
2.) Don't you think it's significant that they sell something based on "robust evidence" and have to change it half way to something else like it's the case of the Risk Parity fund?

Cheers :greedy
Exactly. I always believed it takes a special kind of snake oil to rope in a Boglehead. We are long past being attracted to the hot shot managers, but somehow many still get sucked into "academic evidence" based products regardless of fees (see most commodity futures funds, AQR, Stone Ridge). As passive investing takes off, fund managers are going to try new tactics to overcharge us. In a sense, Bogle's mission to drive down costs and give individual investors a fair chance is always going to be alive and well and it's always important to maintain skepticism towards any high-cost funds that promise to beat the market. Yea, I know, AQR wasn't planning to beat the market but was rather "accessing risk premia"... again, a special kind of snake oil.

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Re: AQR Cuts Staff After a Bad Year (39 out of 41 funds down)

Post by Ketawa » Thu Jan 10, 2019 12:52 pm

People who are criticizing the change in strategy for the Risk Parity Fund (AQRIX): do you realize the AQR has two other funds with literally the same investment approach, according to their web site, that are not changing? Embedded later in the article that was linked, "The firm offers separately managed accounts and other risk parity mutual funds, including the $70.2 million AQR Risk Parity II MV fund and the $27.3 million AQR Risk Parity II HV fund." See if you can spot the difference in the investment approach!

Risk Parity Fund (AQRIX)
Risk parity is all about diversification. Whereas traditional portfolios focus on dollar-based allocation, risk parity portfolios focus on risk-based allocation.

AQR's Risk Parity Fund invests globally across stocks, bonds, currencies and commodities, allocating smaller amounts of capital to assets that are risky and larger amounts to assets that are less risky.

In building the portfolio, we seek assets that we believe are liquid and provide either a positive expected return or some portfolio diversification benefit over the long term.

We target balanced risk allocation across the four asset classes, but we have the ability to exploit tactical opportunities by making modest adjustments, or “tilts,” toward assets that we believe are relatively attractive and away from ones we believe are less attractive.

We believe that by spreading risks in a more balanced manner, and adapting to market conditions, the Fund can generate more stable returns over time than traditional approaches.
Risk Parity II MV Fund (QRMIX)
Risk parity is all about diversification. Whereas traditional portfolios focus on dollar-based allocation, risk parity portfolios focus on risk-based allocation.

AQR's Risk Parity II MV Fund invests globally across equity, fixed income and inflation-sensitive assets, allocating smaller amounts of capital to assets that are risky and larger amounts to assets that are less risky.

In building the portfolio, we seek assets that we believe are liquid and provide either a positive expected return or some portfolio diversification benefit over the long term.

We target balanced risk allocation across the three asset groups, but we have the ability to exploit tactical opportunities by making modest adjustments, or “tilts,” toward assets that we believe are relatively attractive and away from ones we believe are less attractive.

We believe that by spreading risks in a more balanced manner, and adapting to market conditions, the Fund can generate more stable returns over time than traditional approaches.
Risk Parity II HV Fund (QRHIX)
Risk parity is all about diversification. Whereas traditional portfolios focus on dollar-based allocation, risk parity portfolios focus on risk-based allocation.

AQR's Risk Parity II HV Fund invests globally across equity, fixed income and inflation-sensitive assets, allocating smaller amounts of capital to assets that are risky and larger amounts to assets that are less risky.

In building the portfolio, we seek assets that we believe are liquid and provide either a positive expected return or some portfolio diversification benefit over the long term.

We target balanced risk allocation across the three asset groups, but we have the ability to exploit tactical opportunities by making modest adjustments, or “tilts,” toward assets that we believe are relatively attractive and away from ones we believe are less attractive.

We believe that by spreading risks in a more balanced manner, and adapting to market conditions, the Fund can generate more stable returns over time than traditional approaches. As noted above, the Fund's strategy targets 15% annual volatility.
Please, have some intellectual honesty or at least read the article before claiming that AQR does not believe in their models, this is a grave concern, etc.

Disclosure: I do not hold any of the risk parity funds. 100% of my IRA is in QSPIX, QSMLX, QICLX, and QEELX, which are the Style Premia Alternative Fund and three multi-style long equity funds for different world regions.

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Re: AQR Cuts Staff After a Bad Year (39 out of 41 funds down)

Post by whodidntante » Thu Jan 10, 2019 1:17 pm

Meh. Value, size, momentum and market factor all had a bad year. I don't have a particular beef with AQR other than I think some of their funds are too expensive for what they are doing. Long short portfolios are more expensive to run, but they also have long only portfolios that they charge too much to run.

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Re: AQR Cuts Staff After a Bad Year (39 out of 41 funds down)

Post by Ketawa » Thu Jan 10, 2019 1:22 pm

hdas wrote:
Thu Jan 10, 2019 1:10 pm
Mr. Ketawa,
Along the same lines, given the disparity in AUM between those 3 funds. The firm basically reduced their Risk Parity Strategy from ~380 million to ~120 million, or to less than 1/3. That doesn't signal belief in one's models. Good luck with your investments.

Cheers :greedy
From the links you provided, this sounds like a technical change in how they implement the risk parity strategy and not what you are claiming, abandoning the strategy for $260 million of their assets.
As a result of the changes the fund will be able to gain equity exposure and engage in security selection through specific names as opposed to only through derivatives. [...] Whereas the fund previously sought ‘to balance the allocation of risk across asset classes,’ it will now allocate assets in a way that ‘avoids excessive risk exposure to any single asset class (e.g., equities, bonds, commodities) or risk premium (e.g., equity risk, duration risk, currency risk),’ according to the filing.
They will be able to hold securities instead of derivatives, and they will modify the way they allocate risk across the same strategies and asset classes in such a way that I can't even tell the difference.

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Re: AQR Cuts Staff After a Bad Year (39 out of 41 funds down)

Post by 2015 » Thu Jan 10, 2019 1:33 pm

oneleaf wrote:
Thu Jan 10, 2019 12:37 pm
hdas wrote:
Thu Jan 10, 2019 12:10 pm
Fair enough, but 2 points:

1.) Those ppl don't have an army of apologist peddling their funds regardless of performance/fees in this forum and in the general press.
2.) Don't you think it's significant that they sell something based on "robust evidence" and have to change it half way to something else like it's the case of the Risk Parity fund?

Cheers :greedy
Exactly. I always believed it takes a special kind of snake oil to rope in a Boglehead. We are long past being attracted to the hot shot managers, but somehow many still get sucked into "academic evidence" based products regardless of fees (see most commodity futures funds, AQR, Stone Ridge). As passive investing takes off, fund managers are going to try new tactics to overcharge us. In a sense, Bogle's mission to drive down costs and give individual investors a fair chance is always going to be alive and well and it's always important to maintain skepticism towards any high-cost funds that promise to beat the market. Yea, I know, AQR wasn't planning to beat the market but was rather "accessing risk premia"... again, a special kind of snake oil.
Really? From where I sit lots of BH's fall for all manner of snake oil, or at least narrative. Witness the fire hose of links here to academics, bloggers, yet another book from an "expert", charts, graphs, analysis, new "studies", all using all kinds of obfuscating terminology and smoky pattern mirages to make the simple complex. Que bono all of this "information"? The man doesn't have to be wearing the proverbial cheap white suit to be selling bottles of Dr. Financial Feelgood.

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Re: AQR Cuts Staff After a Bad Year (39 out of 41 funds down)

Post by greg24 » Thu Jan 10, 2019 1:50 pm

Ketawa wrote:
Thu Jan 10, 2019 12:52 pm
People who are criticizing the change in strategy for the Risk Parity Fund (AQRIX): do you realize the AQR has two other funds with literally the same investment approach, according to their web site, that are not changing?
Why do three of their funds have literally the same investment approach?

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Re: AQR Cuts Staff After a Bad Year (39 out of 41 funds down)

Post by greg24 » Thu Jan 10, 2019 1:54 pm

oneleaf wrote:
Thu Jan 10, 2019 12:37 pm
I always believed it takes a special kind of snake oil to rope in a Boglehead.
:sharebeer

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Re: AQR Cuts Staff After a Bad Year

Post by midareff » Thu Jan 10, 2019 1:57 pm

HomerJ wrote:
Thu Jan 10, 2019 9:50 am
hdas wrote:
Thu Jan 10, 2019 9:40 am
rkhusky wrote:
Thu Jan 10, 2019 8:43 am
hdas wrote:
Thu Jan 10, 2019 8:38 am
AQR’s U.S. mutual funds had outflows of $5 billion in the first 11 months of 2018, according to data from Morningstar Inc.
Must be people who missed the part about sticking with a factor or alternative strategy through 10 or 20 years of under-performance. Probably thought they could make a quick buck off a new hot strategy based on a lot of fancy math.
Why would they stick to something that it's going to change it's implementation midway anyways? See here

Regarding the Risk Parity debacle:
Starting January 30, 2019, the fund will change its name to the AQR Multi-Asset fund to reflect a shift in investment strategy.

As a result of the changes the fund will be able to gain equity exposure and engage in security selection through specific names as opposed to only through derivatives.

In addition, the fund will have greater flexibility in how it allocates money across various asset classes.

Whereas the fund previously sought ‘to balance the allocation of risk across asset classes,’ it will now allocate assets in a way that ‘avoids excessive risk exposure to any single asset class (e.g., equities, bonds, commodities) or risk premium (e.g., equity risk, duration risk, currency risk),’ according to the filing.
AQR losing money one year is no big deal. People pulling money out is normal after a bad year. AQR having to lay off people because of all the redemptions is not great, but understandable.

AQR changing their models and implementation (of only one fund so far) is HUGE. That means they don't have faith in at least one of their models anymore, and what they are SELLING is faith in their super-quant super-math super-tested-historically models
I have faith in the simple time tested three or four fund model. Keep your super quant fancy dancy easy oeazy understand nothing models away from me.

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Re: AQR Cuts Staff After a Bad Year (39 out of 41 funds down)

Post by David Jay » Thu Jan 10, 2019 2:58 pm

Tamalak wrote:
Thu Jan 10, 2019 12:16 pm
(I did not, however, lay off any of my 1 employees)
We're glad you didn't end up out on the street. :wink:
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Re: AQR Cuts Staff After a Bad Year (39 out of 41 funds down)

Post by corn18 » Thu Jan 10, 2019 4:22 pm

David Jay wrote:
Thu Jan 10, 2019 2:58 pm
Tamalak wrote:
Thu Jan 10, 2019 12:16 pm
(I did not, however, lay off any of my 1 employees)
We're glad you didn't end up out on the street. :wink:
Whaat kind of separation package would your 1 employee get?
Don't do something, just stand there!

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Re: AQR Cuts Staff After a Bad Year (39 out of 41 funds down)

Post by tarheel » Fri Jan 10, 2020 6:12 am

Bumping after another new round of layoffs to start 2020!

While I stick to my AQR multifactor funds (and QSPIX/QMHIX) "like grim death" as Cliff would say, I'd be lying if I said this didn't bother me some.

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hdas
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Post by hdas » Fri Jan 10, 2020 7:29 am

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Last edited by hdas on Wed Jan 29, 2020 2:59 pm, edited 1 time in total.
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Forester
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Re: AQR Cuts Staff After a Bad Year (39 out of 41 funds down)

Post by Forester » Fri Jan 10, 2020 9:53 am

CTAs made about 7% last year so AQR's managed futures fund really stank to lose 11%. The problem is AQR are too big to mix it with the small quant operations and too expensive to beat the likes of Vanguard & iShares. Quant factor funds cost 0.20% or less nowadays.

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Re: AQR Cuts Staff After a Bad Year (39 out of 41 funds down)

Post by garlandwhizzer » Fri Jan 10, 2020 12:06 pm

HomerJ wrote:

AQR changing their models and implementation (of only one fund so far) is HUGE. That means they don't have faith in at least one of their models anymore, and what they are SELLING is faith in their super-quant super-math super-tested-historically models
AQR is run by brilliant, highly-educated stock market mavens who create state of the art portfolios based solidly on backtesting, aiming to maximize risk adjusted returns with lower volatility relative to beta. It is quite clear from 2018 market action that all this expertise did not produce the expected results, nor has it, I suspect, over the last decade. The idea that fascinating but unrealistic factor models based on backtesting can reliably predict future market action over a given time frame is IMO a flawed concept. Sometimes it works, sometimes it doesn't. The market seems determined not be fully defined by models even if created by geniuses. One concept that you can count on and that always seems to be working is the Cost Matters Hypothesis. AQR's high fees and complex expensive strategies did not overcome that hurdle in this case. Lousy performance is hard to tolerate especially if you're paying high fees to get that underperformance.

Garland Whizzer

marcopolo
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Re: AQR Cuts Staff After a Bad Year (39 out of 41 funds down)

Post by marcopolo » Fri Jan 10, 2020 1:19 pm

garlandwhizzer wrote:
Fri Jan 10, 2020 12:06 pm
HomerJ wrote:

AQR changing their models and implementation (of only one fund so far) is HUGE. That means they don't have faith in at least one of their models anymore, and what they are SELLING is faith in their super-quant super-math super-tested-historically models
AQR is run by brilliant, highly-educated stock market mavens who create state of the art portfolios based solidly on backtesting, aiming to maximize risk adjusted returns with lower volatility relative to beta. It is quite clear from 2018 market action that all this expertise did not produce the expected results, nor has it, I suspect, over the last decade. The idea that fascinating but unrealistic factor models based on backtesting can reliably predict future market action over a given time frame is IMO a flawed concept. Sometimes it works, sometimes it doesn't. The market seems determined not be fully defined by models even if created by geniuses. One concept that you can count on and that always seems to be working is the Cost Matters Hypothesis. AQR's high fees and complex expensive strategies did not overcome that hurdle in this case. Lousy performance is hard to tolerate especially if you're paying high fees to get that underperformance.

Garland Whizzer
I don't think you are giving the brilliant minds at AQR enough credit. They created the latest shiney new thing, made it sound very smart, and complicated, justifying the very high costs. Lots of people bought their products, despite those high costs, and nary a track record. They all became fabulously wealthy. Sounds like their model worked just fine.

The mistake people made (maybe, still probably too early to tell for sure) was believing this latest shiney new thing was going to be something special compared to last shiney new thing that they abandoned because it did not work out like they hoped.
Once in a while you get shown the light, in the strangest of places if you look at it right.

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Re: AQR Cuts Staff After a Bad Year (39 out of 41 funds down)

Post by afan » Fri Jan 10, 2020 2:42 pm

To be fair:
Marketing- World class
Money management, as if that matters- unimpressive.

But QSPIX is old news.
First there was PCRIX- everyone needed this magic fund.
Then there was QSPIX- desparate threads about how the fund had closed. How, oh how will anyone invest their money without this one fund?
More recently, it has been lending and reinsurance funds.

As long as people can be convinced to pay 100 times the ER of VTI, there will be more brilliant investors ready to sell them a shiny new toy.
We don't know how to beat the market on a risk-adjusted basis, and we don't know anyone that does know either | --Swedroe | We assume that markets are efficient, that prices are right | --Fama

Bitzer
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Re: AQR Cuts Staff After a Bad Year (39 out of 41 funds down)

Post by Bitzer » Fri Jan 10, 2020 3:21 pm

I drank the Kool Aid, as they say, on the first two of these funds, PCRIX and QSPIX. I sold PCRIX at a substantial loss some time ago. At the suggestion of some on this board and as I mentioned in a previous post, I'm holding QSPIX through a complete market cycle (whatever that is for QSPIX) and hoping that the current cycle ends before the value of my investment goes to zero.

In fairness to Cliff and Larry, many other quant fund and hedge fund type investments aren't doing well in this market environment.

There was a contributor to another investment board, Sam Lee (SVRN Asset Management), who, in 2016, wrote quite astutely and persuasively about AQR and made the following statement:

"I have almost a third of my net worth in AQR Long-Short Equity and none in AQR's Multi-Style funds. I'm putting my money where my mouth is."

I'd be interested to hear Mr. Lee's current comments about AQR

afan
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Re: AQR Cuts Staff After a Bad Year (39 out of 41 funds down)

Post by afan » Fri Jan 10, 2020 4:19 pm

He probably cannot afford internet access anymore.
We don't know how to beat the market on a risk-adjusted basis, and we don't know anyone that does know either | --Swedroe | We assume that markets are efficient, that prices are right | --Fama

Wind_Reaver
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Re: AQR Cuts Staff After a Bad Year (39 out of 41 funds down)

Post by Wind_Reaver » Fri Jan 10, 2020 5:32 pm

AQR is a global investment management firm dedicated to delivering results for our clients.
Of 41 AQR mutual funds, only two had positive returns over the past year, according to data compiled by Bloomberg.
Prior to purchasing investment products, it is imperative that investors read the provided documentation. AQR presents the following risk categories to investors in the Statement of Additional Information (SAI) documents, with detailed explanations for each. Many of these risks are mitigated by taking a passive approach to investing by simply indexing and minding the impact of cost.
  • Risks Related to the Adviser and to its Quantitative and Statistical Approach
    • Trading Judgment
    • Trading Decisions Based on Quantitative and Other Analysis
    • Model and Data Risk
    • Obsolescence Risk
    • Crowding/Convergence
    • Risk of Programming and Modeling Errors
    • Computer Systems Risk
    • Operational Risk
    • Involuntary Disclosure Risk
    • Proprietary Trading Methods

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Post by hdas » Fri Jan 10, 2020 5:59 pm

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Last edited by hdas on Wed Jan 29, 2020 2:59 pm, edited 1 time in total.
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Re: AQR Cuts Staff After a Bad Year (39 out of 41 funds down)

Post by Robert T » Fri Jan 10, 2020 6:34 pm

hdas wrote:
Fri Jan 10, 2020 5:59 pm
What other investment board is this? Thanks :greedy
Here's a reprint - https://svrn.co/blog/2016/5/23/aqr-long ... l-a-review

Sam Lee seems to have since become a crypto currency trader (at least with his own money).
.

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Re: AQR Cuts Staff After a Bad Year (39 out of 41 funds down)

Post by marcopolo » Fri Jan 10, 2020 6:38 pm

Wind_Reaver wrote:
Fri Jan 10, 2020 5:32 pm
AQR is a global investment management firm dedicated to delivering results for our clients.
Of 41 AQR mutual funds, only two had positive returns over the past year, according to data compiled by Bloomberg.
Prior to purchasing investment products, it is imperative that investors read the provided documentation. AQR presents the following risk categories to investors in the Statement of Additional Information (SAI) documents, with detailed explanations for each. Many of these risks are mitigated by taking a passive approach to investing by simply indexing and minding the impact of cost.
  • Risks Related to the Adviser and to its Quantitative and Statistical Approach
    • Trading Judgment
    • Trading Decisions Based on Quantitative and Other Analysis
    • Model and Data Risk
    • Obsolescence Risk
    • Crowding/Convergence
    • Risk of Programming and Modeling Errors
    • Computer Systems Risk
    • Operational Risk
    • Involuntary Disclosure Risk
    • Proprietary Trading Methods
I would make a couple of points.

First, these AQR are typically purchased through a (high priced) advisor, and on their recommendation. If their client dies not understand the risk associted with them, I would place much of the blame on the advisor, what are they being paid those high AUM fees for, hopefully more than to say "read the prospectus"?

Second, we have been repeatedly been told to ignore what is in the prospectus, like when the prospectus says a fund is actively managed, but we are told it is really passive, or when the prospectus says the ER is 2.5%, but we are told to ignore that because it is "only 1.6%. Those things might be true, but then it seems absurd to say "look, the prospectus said these things were risky", when presumably the advisor must have assessed that they were of appropriate risk for the client, right?

edit: fixed typo
Last edited by marcopolo on Sat Jan 11, 2020 12:16 am, edited 1 time in total.
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Re: AQR Cuts Staff After a Bad Year (39 out of 41 funds down)

Post by Bitzer » Fri Jan 10, 2020 6:55 pm

@afan I'm not very agile on this board, so I can't reference your comment here. Very funny!

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Re: AQR Cuts Staff After a Bad Year (39 out of 41 funds down)

Post by SlowMovingInvestor » Fri Jan 10, 2020 7:45 pm

oneleaf wrote:
Thu Jan 10, 2019 12:37 pm

Exactly. I always believed it takes a special kind of snake oil to rope in a Boglehead.
True, but there are some examples of outperformance -- Renaissance being the most obvious. That keeps us believing there may be some secret sauce :happy

And while their record is shorter, or not quite as stellar -- DE Shaw and 2Sigma.

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Re: AQR Cuts Staff After a Bad Year (39 out of 41 funds down)

Post by HomerJ » Fri Jan 10, 2020 9:18 pm

marcopolo wrote:
Fri Jan 10, 2020 6:38 pm
Second, we have been repeatedly been told to ignore thi vs in the prospectus, like when the prospectus says a fund is actively managed, but we are told it is really passive, or when the prospectus says the ER is 2.5%, but we are told to ignore that because it is "only 1.6%. Those things might be true, but then it seems absurd to say "look, the prospectus said these things were risky", when presumably the advisor must have assessed that they were of appropriate risk for the client, right?
The day I am told to ignore the prospectus is the day I stop listening to that person.
Last edited by HomerJ on Fri Jan 10, 2020 11:16 pm, edited 2 times in total.
A Goldman Sachs associate provided a variety of detailed explanations, but then offered a caveat, “If I’m being dead-### honest, though, nobody knows what’s really going on.”

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Re: AQR Cuts Staff After a Bad Year (39 out of 41 funds down)

Post by HomerJ » Fri Jan 10, 2020 9:20 pm

SlowMovingInvestor wrote:
Fri Jan 10, 2020 7:45 pm
oneleaf wrote:
Thu Jan 10, 2019 12:37 pm

Exactly. I always believed it takes a special kind of snake oil to rope in a Boglehead.
True, but there are some examples of outperformance -- Renaissance being the most obvious. That keeps us believing there may be some secret sauce :happy

And while their record is shorter, or not quite as stellar -- DE Shaw and 2Sigma.
Oh there is a secret sauce... Some people DO beat the market.

The odds of you picking that person is small though. Just go with the 100% chance of matching the market instead of shooting for a 10% chance of beating the market (and a 90% chance of trailing the market)
A Goldman Sachs associate provided a variety of detailed explanations, but then offered a caveat, “If I’m being dead-### honest, though, nobody knows what’s really going on.”

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Re: AQR Cuts Staff After a Bad Year (39 out of 41 funds down)

Post by nedsaid » Sat Jan 11, 2020 9:13 pm

garlandwhizzer wrote:
Fri Jan 10, 2020 12:06 pm
HomerJ wrote:

AQR changing their models and implementation (of only one fund so far) is HUGE. That means they don't have faith in at least one of their models anymore, and what they are SELLING is faith in their super-quant super-math super-tested-historically models
AQR is run by brilliant, highly-educated stock market mavens who create state of the art portfolios based solidly on backtesting, aiming to maximize risk adjusted returns with lower volatility relative to beta. It is quite clear from 2018 market action that all this expertise did not produce the expected results, nor has it, I suspect, over the last decade. The idea that fascinating but unrealistic factor models based on backtesting can reliably predict future market action over a given time frame is IMO a flawed concept. Sometimes it works, sometimes it doesn't. The market seems determined not be fully defined by models even if created by geniuses. One concept that you can count on and that always seems to be working is the Cost Matters Hypothesis. AQR's high fees and complex expensive strategies did not overcome that hurdle in this case. Lousy performance is hard to tolerate especially if you're paying high fees to get that underperformance.

Garland Whizzer
Garland and Homer, it boils down to what I have said here for years. No matter how brilliantly and beautifully you construct your portfolio and no matter how much market insight you have, markets will do what markets will do. Markets do not have to act in accordance with investor expectations. The Style Premia funds essentially made a bet on Value and Value has been trailing Growth for a decade now. As long as the Large Growth trend in the markets continue, the funds betting on Value and using Long/Short Techniques are going to disappoint. Even though a reversion to Value seems imminent, the markets blissfully continue in the Large Growth trend. This could continue for a while.

Also instructive that American Century Investments had five liquid Alt funds and soon will be down to two. In addition, they are closing their 130/30 fund as well. That should tell you something. Liquid Alts have been a disappointment.

The thing is, once the last believer in Liquid Alts throws in the towel, these funds will start performing again. That pretty much also hinges upon the last true believer in Value throwing in the towel as well. Rick Ferri has all but thrown in the towel regarding factor tilting so we might be getting close. He was one of the true believers but like the Secretary on Mission Impossible seems to be disavowing all knowledge. This post will self destruct in five seconds.
A fool and his money are good for business.

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Re: AQR Cuts Staff After a Bad Year (39 out of 41 funds down)

Post by whodidntante » Sat Jan 11, 2020 9:27 pm

nedsaid wrote:
Sat Jan 11, 2020 9:13 pm
garlandwhizzer wrote:
Fri Jan 10, 2020 12:06 pm
HomerJ wrote:

AQR changing their models and implementation (of only one fund so far) is HUGE. That means they don't have faith in at least one of their models anymore, and what they are SELLING is faith in their super-quant super-math super-tested-historically models
AQR is run by brilliant, highly-educated stock market mavens who create state of the art portfolios based solidly on backtesting, aiming to maximize risk adjusted returns with lower volatility relative to beta. It is quite clear from 2018 market action that all this expertise did not produce the expected results, nor has it, I suspect, over the last decade. The idea that fascinating but unrealistic factor models based on backtesting can reliably predict future market action over a given time frame is IMO a flawed concept. Sometimes it works, sometimes it doesn't. The market seems determined not be fully defined by models even if created by geniuses. One concept that you can count on and that always seems to be working is the Cost Matters Hypothesis. AQR's high fees and complex expensive strategies did not overcome that hurdle in this case. Lousy performance is hard to tolerate especially if you're paying high fees to get that underperformance.

Garland Whizzer
Garland and Homer, it boils down to what I have said here for years. No matter how brilliantly and beautifully you construct your portfolio and no matter how much market insight you have, markets will do what markets will do. Markets do not have to act in accordance with investor expectations. The Style Premia funds essentially made a bet on Value and Value has been trailing Growth for a decade now. As long as the Large Growth trend in the markets continue, the funds betting on Value and using Long/Short Techniques are going to disappoint. Even though a reversion to Value seems imminent, the markets blissfully continue in the Large Growth trend. This could continue for a while.

Also instructive that American Century Investments had five liquid Alt funds and soon will be down to two. In addition, they are closing their 130/30 fund as well. That should tell you something. Liquid Alts have been a disappointment.

The thing is, once the last believer in Liquid Alts throws in the towel, these funds will start performing again. That pretty much also hinges upon the last true believer in Value throwing in the towel as well. Rick Ferri has all but thrown in the towel regarding factor tilting so we might be getting close. He was one of the true believers but like the Secretary on Mission Impossible seems to be disavowing all knowledge. This post will self destruct in five seconds.
Rick still has a heathen streak in his "total economy" portfolio. Small-value, REITS, 45% non-USA equities? Scandalous! :happy
https://core-4.com/total-economy-core-4-portfolio/

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