Cliff Asness Hedges Regarding Hedge Funds

In a recent Bloomberg article, AQR’s Cliff Asness argues that the opinion pendulum on hedge funds has swung too far, that “all you read about today is that hedge funds are a failure and investors are fleeing.” This overreaction, he explains, comes in part from; (1) a failure to understand how to measure hedge-fund returns, and the fact that (2) the last few years have been a “mild disappointment and they have given critics enough… Read More

Asness of AQR Says Passive Growth Is Good for Industry

Cliff Asness, co-founder of AQR Capital Management, thinks the flow of money into passive investing has been a positive for the industry, according to a recent Bloomberg article. Per the article, Asness believes that active managers “have historically overcharged for scant returns and the shift toward questioning whether high fees are deserved is a healthy change.” The managing principal of Greenwich, Connecticut-based AQR (which oversees $208 billion in assets) argues that there are too many active… Read More

Cliff Asness Says Stocks and Bonds Will Return only 2%

At the 2nd annual Evidence-Based Investing Conference earlier this month, AQR’s Cliff Asness shared his view that the expensive financial markets will offer weaker returns going forward. This according to a recent CNBC article. According to the article, Asness predicts that investors with a “balanced portfolio of stocks and bonds will only generate 2 percent real annual returns,” but warned against betting against the market. He argues that strong evidence exists indicating that high CAPE… Read More

Study Raises Questions About Factor Significance

A new study has found that most of the market anomalies academics have identified are not statistically significant, says a recent Wall Street Journal article. After analyzing 447 anomalies (the biggest test of its kind conducted so far), the researchers concluded that more than eight out of ten “vanish when rigorous tests are applied,” according to the article. In their report, they warn that academics may manipulate statistics to come up with compelling findings, a… Read More

Asness versus Arnott: The Factor Timing Debate Continues

AQR Management founder Cliff Asness continues to argue that factor timing is “deceptively difficult,” contrary to what Rob Arnott of Research Affiliates would have you believe, says a recent article in Institutional Investor. Asness’ issue, the article says, is with Arnott’s contention that risk premia factors such as value, momentum, growth and volatility have become “overvalued as a result of the rising popularity of smart beta and factor investing strategies” and that investors should “time… Read More

Asness and Arnott Talk Market Timing, Smart Beta and Behavioral Biases

Maybe not always. At least that was the upshot of a debate between Cliff Asness of AQR and Rob Arnott of Research Affiliates, panelists at the recent Morningstar conference in Chicago. Although they debated various topics, they seemed to agree that value stocks deserve attention when they’re cheap. According to Asness, founder and managing principal at AQR, “Timing the market is hard and we call it a sin, but we recommend that investors sin a… Read More

The Payoff and Perils of Momentum-based Stocks

Many investors follow momentum-based methods or approaches when investing in equities, but does momentum investing actually work and what are the results? This is the basis for a recent AAII article by Charles Rotblut, CFA, vice president at AAII and editor of the AAII Journal. Relative price strength, which compares the price performance of a security to another security or the overall market or an industry, is one of the most popular ways to identify… Read More

Asness vs. Arnott on Smart Beta, Factor Timing, and Performance Chasing

Cliff Asness, co-founder of AQR Capital Management, added fuel to the debate over “smart beta” investing with a recent paper attacking arguments made by Rob Arnott of Research Affiliates. Arnott, once understood as a proponent of smart beta approaches due to his research and development of fundamental indexing, claimed that many smart beta exchange traded funds “have succeeded solely because they have become more and more expensive.” In an argument that Asness describes as alarmist,… Read More

AQR’s Asness on Fama, Momentum Investing and More

Clifford Asness, Managing and Founding Principle of AQR, writes in his “Cliff’s Perspective” blog about Nobel Laureate and Professor Eugene Fama’s views on momentum investing. Asness is a believer in momentum and, as he notes, wrote a dissertation on it under the supervision of Fama. Asness notes that “the long-term success of the momentum factor seems to be a challenge to many observers,” including Fama. Commenting on a recent interview with Fama, Asness notes that… Read More

AQR Tests Market Timing Techniques, Helping to Boost Long Term Returns

  A recent article by Cliff Asness and colleagues from AQR Capital Management challenges the academic finance recommendation to avoid attempts to time the market. “Sinning a little,” Asness and colleagues suggest, can boost returns.  Among other things, they suggested trimming exposure to stocks in October 2015, as the article went to print, by holding more cash. The article uses two core factors – valuation, measured by the cyclically adjusted PE (CAPE) factor made known… Read More