The AQR hedge fund splits up with 5 top managers and closes the division in difficulty

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Computer-based hedge fund group RQA capital management is to remove five partners from its ranks and shrink the bond arm, continuing to reduce trades after several years of lean for many systematic trading strategies.

The $ 137 billion investment group led by Clifford Asness was a pioneer of “Quantitative” investment strategies attempting to profit from long-term market signals rather than traditional human traders and fund managers.

AQR’s assets under management peaked at $ 226 billion in mid-2018, but since then many of the major strategies it uses have gone up in smoke, deflating its dimension and leading to several rounds of job cuts at the Greenwich, Connecticut-based hedge fund manager.

On Thursday, the firm announced internally that five of its top executives would be leaving and its bond investing side would be reorganizing, with its struggling “long only” fixed income arm starting in 2014 which was completely closed, according to people familiar with the matter.

AQR declined to comment on the moves, but company partner Suzanne Escousse said in a statement: “We remain committed to systematically trading fixed income in our long-short, alternative and risk-equal strategies as we have done since. start of AQR.. ”

The top five were Michael Katz, responsible for portfolio implementation; Michael Patch, head of risk; Ari Levine, senior researcher; Scott Richardson, co-head of fixed income research; and Christopher Palazzolo, AQR’s responsible investment manager, according to people familiar with the matter. The exits will leave 38 executives in the company.

Their departures follow the announcement earlier this year that Ronen Israel, a senior principal and 22-year veteran of AQR, would be stepping down to help start a biotech company. This led to AQR’s entire investment team reporting directly to Asness and fellow founder John Liew.

AQR manages a panoply of investment vehicles, ranging from more traditional and expensive hedge funds to cheaper and simpler funds that simply leverage one of the many in the market “factors” identified by academics over the years. In some ways, it’s about quantifying what traditional fund managers have always done, automating it, and then doing it cheaper.

Buy systematically “Value” stocks – economic and unpopular stocks that have historically produced gains that beat the market – have suffered its deepest and longest setback over the past decade, but since 2018 many of AQR’s other strategies have started to struggle, aggravating his problems.

However, many of its core strategies began to pick up force in the final months of 2020, and the recovery continued. “While 2018-2020 was actually the hardest time I’ve ever seen, the first three months of 2021 were one of the strongest starts a year we’ve had in our history,” Asness told the Financial Times. earlier this year. “I wouldn’t be surprised if this recovery was the biggest and the longest.”

Jay Horgen, chief executive officer of Affiliated Managers Group – a publicly traded investment firm that owns a slice of AQR – indicated in a recent conference call that the turnaround has continued since then. “We are encouraged by the turnaround in the performance of our quant managers, especially AQR,” he told analysts. “This represents an asymmetrical positive side for us”.

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