AQR Fesses Up

Damn the Torpedoes!

Cliff Asness is plunging full speed ahead. But he will be cutting back his computer-driven stock selection strategies, whose models turned in “shockingly bad” results over the past few weeks.

AQR is solvent and open for business, but the poo-poo platter of funds they offer are going to look a little skimpier. Macro is still on the menu. But fans of the Goldman alum will have to go on a diet, particularly if they want to eat his quantitative cooking. Cliff is blaming a mass exit by similar funds for his woes, as the third or fourth hundred-year storm this decade hit quants around the Street.

“We knew this was a risk-factor, but, like most others, in hindsight, we underestimated the magnitude and the speed with which danger could strike, but this is decidedly not a regular drawdown. It’s a de-leveraging of historical proportions.”

But Cliff ain’t giving up. Given the exit of so many funds from the arena, the getting should be good again soon. Or something like that....AQR ain’t running scared just because those other folks screwed up. They are not even throwing out their cookbook.

“Despite this reduction, we strongly view that the exit of many others from this style of stock picking represents a striking opportunity for future gains, which we fully intend to capitalize on for our clients. To that end, we’ve already seen increased client demand for our aggressive market-neutral equity fund.”

The Global Stock Selection fund is down approximately 20% this year: but given the volatility that is a moving target. It manages roughly $1billion.

Cliff might be a quant, but sure sounds like a marketing or sales guy.

Putting on a brave face might stop a run on his bank, but we are remaining at Defcon 4 around these parts.

This is not likely to be the last WOPR of a story you hear from Wall Street geniuses. The game they were playing sounds like some sort of mutually assured destruction.

I hope they learned something from this episode.

Tic tac toe, anyone?

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The content contained represent the opinions of 1440 Wall Street. This commentary in no way constitutes a solicitation of business or investment advice. It is intended solely for the entertainment of the reader, and the author.

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