AQR’s flagship mutual fund, the AQR Multi-Asset Fund Class I (AQRIX) is up 1.7 percent on an annualized one-year basis, whereas the S&P 500 is up 7.8 percent over the same time frame. He says on a 20-year basis, from December 2000 to March 2019, net of fees, the AQR Global Stock Selection Strategy has a net annual return of 4.3 percent and a minus 0.17 percent correlation to the S&P.
The point of the strategy is to be uncorrelated to the market, he said, adding he’s happy with the strategy’s long run. He said he takes some comfort in the fact that they’ve seen the strategy perform poorly and rebound, during the dot-com era, for example.
Asness admits that when a lot of money comes into certain factors, it can affect performance. For example, if a lot of money came into a value strategy, it would no longer make those value stocks cheap and it would dilute the factor’s effectiveness.
He offered some advice for advisors who might be dealing with their underperformance: Know the process, keep size bets reasonable, check to see if the process is broken and stick with your strategy.
“Human nature wants to change when things are down. In tough times, test every possibility why now might be different. If you’ve kept an open mind, checked for recent poor performance and if all of that passes, stick like grim death to your beliefs,” he said.