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AQR hedge fund suffers $10bn in outflows

AQR Capital Management LLC updates

Assets in a hedge fund run by AQR have tumbled more than $10bn over the past four years, as a lengthy period of poor returns has persuaded many clients to pull out their cash.

The AQR Managed Futures Strategy fund, a computer-driven mutual fund that tries to profit from market trends, has fallen in size from about $12bn in late 2017 to $1.5bn currently, according to fund documents. While the fund’s bets have often lost money in recent years, most of the drop in assets pertains to client withdrawals.

The outflows come even as Connecticut-based AQR has enjoyed a stronger period of performance more broadly across many of its portfolios, after shedding $86bn in assets from its peak.

AQR, which manages about $140bn in total assets and is headed by former Goldman Sachs managing director Cliff Asness, is well known for its academic approach to investing. It breaks down hedge fund returns into their basic components before building relatively low-cost portfolios to try and exploit those characteristics.

AQR declined to comment.

The AQR Managed Futures Strategy fund is one of the best-known funds in the trend-following sector. Such funds use algorithms to try to identify and then latch on to persistent up or down trends in global futures markets.

However, the fund has often struggled to make money. While it gained 5.4 per cent last March during the stock market’s huge sell-off, it is down 3.9 per cent over the past five years and is roughly flat over the past decade according to fund documentation.

The fund has slipped 2.7 per cent in the first eight months of 2021, even as many of its peers are profiting.

Among those peers sits Man Group’s $1.4bn AHL Diversified fund, which is up 10.3 per cent to mid-month. Aspect Capital’s $3bn Diversified fund has gained 10.5 per cent this year, while GSA’s Trend fund is up 7.2 per cent, according to numbers sent to investors and people familiar with the performance.

Managed futures funds are up 7.8 per cent on average this year to the end of August, according to data group HFR. Many such funds have profited as the easing of coronavirus lockdowns and continued central bank stimulus have pushed riskier financial markets higher.

The S&P 500 index has risen 19 per cent in a near-straight line this year, while Brent crude is up 44 per cent. 

AQR’s fund tries to profit from both short and long-term market trends, and to spot when trends have run too far and are about to reverse. The fund has been running bets on the rising price of oil futures, but it also has more than a quarter of its assets in currencies, according to fund documentation, where there have been fewer trends to exploit.

AQR has this year benefited from a rebound in lowly-priced, so-called value stocks. Its Equity Market Neutral Global Value fund gained 12.3 per cent between the start of January and the end of August, while its Absolute Return strategy is up 13.3 per cent.

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