This week, we speak with Cliff Asness, co-founder and managing partner at AQR Capital Management. The firm has ~$100 billion in assets under management. An active researcher, Asness contributes to numerous publications and has received a variety of accolades, including the James R. Vertin Award from CFA Institute in recognition of his lifetime contribution to research. Asness earned his master’s in business administration as well as his Ph.D. in finance from the University of Chicago.
He explains how the firm is only “half hedge fund,” as they employ over 40 different quantitative, many of which are specific investments based on their quantitative research. That multi-strategy approach works well when markets go through long periods where value underperforms. Specifically, when Value doesn’t work, strategies like profitability, fundamental momentum, and low-risk work when Value as an investment style did not. Over that period, expensive companies outperformed not on price but because they out-executed and grew more in terms of earnings, sales, and cash flows.
We discuss how difficult value investing was over the prior decade. The firm can go decades where they don’t talk about value (Post-GFC to 2017), because most everything else they do was working. Neither he nor AQR engages in market timing, but the spread between value and growth had gotten so huge that he felt comfortable “sinning a little.”
You can find him on Twitter here; a list of his favorite books is here; A transcript of our conversation is available here Tuesday.
You can stream and download our full conversation, including any podcast extras, on iTunes, Spotify, Stitcher, Google, YouTube, and Bloomberg. All of our earlier podcasts on your favorite pod hosts can be found here.
Be sure to check out our Masters in Business next week with Dominique Mielle, (retired) partner at Canyon Capital, a $25 billion hedge fund where she worked there for 20+ years. She is also the author of “Damsel in Distressed,” which turns out to be (surprisingly) the very first memoir written by a woman working at a hedge fund. The book is a fun romp covering the 1998-2018 era.
Cliff’s Current Reading
The Hobbit and The Lord of the Rings by J.R.R. Tolkien
Dune by Frank Herbert
Conan: The Thief, The Conqueror, The King: The Collected Adventures of the World’s Greatest Barbarian by Robert E. Howard
How to Invest: Masters on the Craft by David M. Rubenstein