AQR Capital Management, a computer-driven hedge fund group, will remove five partners from its ranks and cut its bond division, continuing to shrink its business after several years of depression in many systematic trading strategies.
The $137 billion investment group led by Clifford Asness has been a pioneer of “quantitative” investment strategies that try to profit from long-term market signals, rather than traditional human traders and fund managers.
AQR’s assets under management reached a peak of $226 billion in mid-2018, but many of its main strategies have since failed, downsized, and led to several rounds of layoffs for hedge fund managers in Greenwich, Connecticut.
According to people familiar with the matter, the company announced internally on Thursday that five of its senior executives will leave, its bond investment department will be reorganized, and its “long-only” fixed-income division, which has been struggling since 2014, will be completely closed. .
AQR declined to comment on these measures, but the company’s partner Suzanne Escousse said in a statement: “We remain committed to systematically trading fixed income in our long-short, alternative and risk parity strategies, just like our own AQR has done since its inception.”
The five “heads” are Michael Katz, the head of portfolio implementation; Michael Patchen, the head of risk; Ari Levine, a senior researcher; Scott Richardson, the co-head of fixed income research; According to people familiar with the matter, Christopher, the head of investment at AQR Palazzolo (Christopher Palazzolo). The withdrawal will leave 38 persons in charge in the company.
Their departure came after the announcement earlier this year that Ronen Israel, a senior principal and a veteran of 22 years at AQR, would resign to help start a biotechnology company. This resulted in all AQR investment teams reporting directly to Asness and founder John Liew.
AQR manages a whole set of investment tools, from more traditional and expensive hedge funds to cheaper and simpler funds, which use only one of many market “factors” that scholars have identified over the years. In some ways, this involves quantifying what traditional fund managers have been doing, automating it, and doing it in a cheaper way.
The systematic purchase of “value” stocks-cheap and unpopular stocks that have generated market-leading returns in the past ten years-have suffered the deepest and longest setbacks in the past decade, but since 2018 Since the beginning of the year, many of AQR’s other strategies have begun to fall into trouble, exacerbating its predicament.
However, many of its major strategies begin to return to attractiveness in the last few months of 2020, and the recovery is still continuing. “Although 2018 to 2020 is actually the toughest period I have ever seen, the first three months of 2021 are one of the strongest starts of the year in our history,” Asness earlier this year Tell the British “Financial Times”. “If this recovery is the largest and lasting the longest, I wouldn’t be surprised.”
Jay Horgen, CEO of Affiliated Managers Group, a listed investment company that owns a portion of AQR, said on a recent conference call that this shift has continued since then. “We are encouraged by the change in the performance of quantitative managers, especially AQR,” he told analysts. “This represents an asymmetric advantage for us.”