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It was an unusually intemperate Tweet, even by Cliff Asness standards.
On Wednesday, the billionaire co-founder of AQR — a quantitative investment firm managing $226 billion — and Twitter raconteur engaged in heated argument on the social media platform with a user tweeting under the handle @Steinernomics.
I have no respect for His ASSness because he has none for his shareholders. I will never buy AQR which I used to at once, and am glad I got out.
Just look at QMNNX and QLENX. You wonder how these funds performed as they did in bull market and then you see how they are performing now. Simply put whatever you want in the name and make it confusing. Make it a point to blah blah when funds are doing well, and when they are doing bad you simply stop communicating. This is the modus operandi of AQR.
How can a strategy said to be market neutral plunge 13-15% YTD?
It’s been an especially rocky and nasty year for most hedge-type funds. In fact, they haven’t done well for many years. And the big hedge funds have experienced huge outflows this year. I don’t pretend to understand it. But there might be more at work here than simply “stupid managers.” High fees for sure. But, possibly, “insane” markets as well based on unsustainable increases in a few large indexes (ie - the elephant chasing his tail). -
Edit: A couple added late-night thoughts:
- Some hedge funds (including so called market neutral funds) may be betting on an eventual break in the unusually strong Dollar. This might involve holding gold or EM bonds - both of which have slumped sharply since the beginning of the year (explaining some of their dismal showing). The reasoning behind this is that the Fed will “blink” after U.S. equity markets have turned down and stop raising rates. I think they’re right in that assumption - but it’s hard to say when that will happen. BTW - Ray Dalio of Bridgewater is one hedge fund manager who is hedging with gold.
- I think the term hedge fund as a style makes more sense than market neutral. If you want a truly “market neutral” approach - go 100% cash. Excepting that extreme, don’t know how you can remain truly neutral.
Alternative-type funds, whether they use long-short, obtuse mathematical, or some other "alternative" strategy, really need to be looked at with a jaundiced eye. The vast majority, almost all actually, either do really well then suffer near collapses, never achieve their lofty expectations, of stagger along just sucking investors' money with high fees. The list of alternative funds that have bit the dust, or ought to have bitten the dust, is legion. I have no doubt that Mr. Asness and his minions are intelligent people. The fact is the fund has put up positive numbers during a bull market, but has been awful when the market is down or fluctuating wildly. That's NOT what investors consider a Market-Neutral kind of fund. Add to that a 2% management fee, and there is a recipe for very disgruntled shareholders, and rightly so. Asness' stupid and childish comments only compound the problem. Sort of like "Don't pay attention to the man behind the curtain," from the Wizard of Oz.
I think Boston Partners Long/Short Equity BPLEX has been the poster child for comparisons in this fund realm. It seems to do it's very best when the market falls down and goes boom but nothing spectacular otherwise. A quick look at M* shows a somewhat enviable 10-yr return but not much over the last 5 years. Still, it's good to be positive than otherwise.
@ducrow I think LCORX is maybe the best of the bunch, but even it significantly underperformed VBINX (which is just a balanced index fund) over every significant time period -- including the 2008 crash.
Comments
Just look at QMNNX and QLENX. You wonder how these funds performed as they did in bull market and then you see how they are performing now. Simply put whatever you want in the name and make it confusing. Make it a point to blah blah when funds are doing well, and when they are doing bad you simply stop communicating. This is the modus operandi of AQR.
Famous for being famous.
Forget Asness, and onward through the fog.
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Edit: A couple added late-night thoughts:
- Some hedge funds (including so called market neutral funds) may be betting on an eventual break in the unusually strong Dollar. This might involve holding gold or EM bonds - both of which have slumped sharply since the beginning of the year (explaining some of their dismal showing). The reasoning behind this is that the Fed will “blink” after U.S. equity markets have turned down and stop raising rates. I think they’re right in that assumption - but it’s hard to say when that will happen. BTW - Ray Dalio of Bridgewater is one hedge fund manager who is hedging with gold.
- I think the term hedge fund as a style makes more sense than market neutral. If you want a truly “market neutral” approach - go 100% cash. Excepting that extreme, don’t know how you can remain truly neutral.