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Perspective

Response to Thomas Hoenig’s “Why ‘Risk-Based’ Capital Is Far Too Risky”

My colleagues have written a response to Thomas Hoenig's recent WSJ op-ed "Why 'Risk-Based' Capital Is Far Too Risky." Hoenig's recommended approach to managing leverage risk using a "simple" notional leverage limit reminds us of Einstein's famous purported comment to make things as simple as possible, but not simpler. The authors believe that Hoenig's approach fails to meet the Einstein test.

Perspective

The Hedgie in Winter

Cliff explains once again why hedge fund returns shouldn’t be compared to 100% long equities, how to do a more proper comparison, and then shares results.

Perspective

Liquid Alt Ragnarök?

Cliff discusses the recent tough times for quantitative factor-based liquid alts and makes the case for why the painful and difficult times are a big part of why our quantitative factors are real and can improve long-term results for those who can allocate part of their portfolio to them and then stick with it.

Perspective

But What About October?

This year of pain in liquid alternatives has continued. Cliff shows the results of an AQR representative liquid alts portfolio and based on an analysis of it, discusses how our investment process and our long-term liquid alts record remains sound, how October was disappointing but not a particularly abnormal outcome, and how our process has been well-behaved over time, particularly compared with the market portfolio.

Perspective

Perhaps the Most Important Essay I Will Ever Co-Author

We model when a hockey coach should pull the goalie when trailing and then discuss how our results relate to key lessons for portfolio and risk management, and business in general.

Perspective

The George Costanza Portfolio

In a follow-up to Liquid Alt Ragnarök?, Cliff shows the results of an illustrative portfolio that does the opposite of what we’d normally do in the spirit of George Costanza, who in one episode of Seinfeld decided he must, in all things, do the opposite of what he’d normally do.

Perspective

Factor Investing Explicitly Tries to Look Lousy on Active Share

There has been much ink, and maybe even some blood, spilled debating the merits of “Active Share” for judging an investment fund. Cliff reviews the frequent misueses of active share, especially related to applying it factor investing

Perspective

Active Share: Different Does Not Equal Better

A buzzword in the investment community these days is active share, a specific way to measure how different a portfolio is from its benchmark. But does it predict higher excess returns? Our AQR white paper, “Deactivating Active Share,” takes a look.

Perspective

Once More, Without Feeling

Cliff discusses why many of the breathless articles and TV headlines we’ve seen lately about the overall U.S. stock market are just not that interesting.

Perspective

Introducing the New AQR S.M.O.O.T.H. Fund

Cliff offers some insights into the world of smoothed returns with a healthy dose of satire.