“We have seen relatively normal factor volatility, factor correlations and transaction costs,” said Ronen Israel, a principal at AQR. “There’s no evidence that the underlying themes are behaving in a way that is symptomatic of factor deleveraging.”

Rather, AQR’s bread-and-butter funds were hit by a temporary yet especially sharp sell-off in value -- a factor favoring cheaper stocks, and a favorite among the managers. Though value staged a slight rebound in late-October, other factors like momentum declined. Making matters worse for AQR, value as measured by a simple price-to-book ratio staged a stronger return than the composite measure used by the firm.

All of which makes it hard for investors to keep the faith, as even Asness acknowledges in his post. But as he points out, that’s exactly why the strategies work in the first place.

“If sticking with them were easy, the threat of them being ‘arbitraged away’ would indeed be much greater, and nobody would take the other side,” he wrote.

Money Moves

All the same, there’s emerging evidence of retail money leaving AQR. UBS’s Pace Alternative Strategies Investments -- where about 7 percent was invested in two AQR funds -- terminated the Greenwich, Connecticut firm as a subadvisor due to “an asset reallocation determination” on Oct. 19, according to a filing. In September, AQR mutual funds saw $1.1 billion in outflows, the fourth biggest outflows of any U.S. fund family, according to Morningstar data.

“Could the recent factor performance be partly driven by investors changing their hearts and pulling their money from corresponding funds? Perhaps,” Vitali Kalesnik, head of equity research at Research Affiliates LLC, said. “Factor performance is generally mean-reverting and fund flows likely play a big role in it.”

In AQR UCITS and mutual funds, investors this year pulled a net total of $3.5 billion through October, according to data compiled by Bloomberg. A managed futures fund, which chases momentum across assets, accounted for $2.2 billion of those losses alone.

But the outflows stop short of institutional clients, where there have been net inflows this year, according to the firm.

“For the most part, our clients understand the economic intuition behind our strategies and appreciate the long-term supporting evidence,” said David Kabiller, co-founder at AQR. “Good strategies can go through tough times.”