AQR Capital Management (Applied Quantitative Research) is a global investment management firm based in Greenwich, Connecticut, United States. The firm, which was founded in 1998 by Cliff Asness, David Kabiller, John Liew and Robert Krail, offers a variety of quantitatively driven alternative and traditional investment vehicles to both institutional clients and financial advisors.
As of December 31, 2016, the firm has $175.2 billion in assets under management.
AQR employs a research-based “systematic and consistent approach” to portfolio construction. This disciplined approach of identifying long-term, repeatable sources of return means “having a high conviction in the process, but not a high conviction in any particular stock.” The firm is a strong proponent of diversification within portfolios, as well as adding strategies with low correlation to traditional asset classes as a complement to existing portfolios. AQR is a leader in investor and advisor education, often sharing insight into its strategies through research, white papers and events.
AQR was an early adopter of style, or factor, investing given the strategy’s academic roots. Although the four styles — value, momentum, defensive and carry — have been well-known and used in quantitative investing for decades, they’ve gained popularity in recent years under the mantle of “Smart Beta.” AQR has long advocated for using these styles together, citing their diversifying qualities. AQR reiterated its strong belief in the strategy, but objection to the name “Smart Beta” in the 2014 article, “Smart Beta: Not New, Not Beta, Still Awesome.”
AQR is perhaps best known for its alternative investment strategies, which aim to offer low correlation to traditional, equity-dominated portfolios. AQR was one of the first investment managers to offer a risk parity strategy, which aims to balance allocations based on underlying risk rather than asset classes. The firm also offers managed futures, a trend-following strategy that is “uncorrelated with other asset classes” and supported by over a century of academic evidence.
AQR was one of the first managers to offer alternative mutual funds, launching its family of mutual funds in 2009. The firm’s liquid alternative strategies were a “category leader” in Morningstar’s ranking for 2015.
Three of AQR’s founding principals — Cliff Asness, Robert Krail and John Liew — met in the University of Chicago’s PhD program, where the foundation of the firm’s investment philosophy took shape.
While still working on his dissertation, which focused on momentum and value, Asness joined Goldman Sachs, where he was asked to lead a new quantitative research team within the firm’s asset management division. Liew and Krail joined him, and the new team applied what they learned in academia to manage both hedge-fund and long-only assets.
In 1998, Asness, David Kabiller, Krail and Liew left Goldman Sachs to establish AQR.
AQR was among the first hedge fund managers to voluntarily register at its inception with the Securities and Exchange Commission. The firm’s first product was a hedge fund, though it soon (2000) entered into traditional portfolio management. In 2009, AQR became one of the first investment managers to offer alternative mutual funds.
The firm is primarily owned by its founders and principals.
As of 2016, approximately half of the AQR’s employees have earned advanced degrees, with 52 holding PhDs. The firm is known to maintain strong, positive ties to leading universities and supports financial research through annual academic awards.
AQR’s Insight Award (see below for winners), which “recognizes the most significant and innovative academic research that offers practical applications for investors,” awarded its fifth annual slate of winners in 2016.
In 2014, AQR partnered with the London Business School to establish The AQR Asset Management Institute, which focuses on asset management research and thought leadership. The Institute rewards scholars in the field with annual grants and prizes.
The firm is also a sponsor of the AQR Top Finance Graduate Award at Copenhagen Business School, which honors the PhD graduates whose research carries the greatest potential impact.
AQR awards a $100,000 annual prize, the AQR Insight Award “to encourage and acknowledge academics whose research promises to be of significant use to institutional investors.”2012 Winners: Bryan Kelly and Seth Pruitt
2013 Winners: Martin Lettau, Michael Weber, and Matteo Maggiori
2014 Winners: Eric Budish, Peter Cramton, and John J. Shim
2015 Co-Winners: Robert Ready, Nikolai Roussanov and Colin Ward / Christopher L. Culp, Yoshio Nozawa and Pietro Veronesi
2016 Co-Winners: Samuel M. Hartzmark and Kelly Shue / Darrell Duffie and Haoxiang Zhu