naked capitalism

November was a bad month for the hedge fund industry, although most reports indicate the pain was distributed more broadly than in August (readers may recall the quants took some stunning losses that month).

The New York Post reports that one of the once-highly-regarded quant funds, ex-Goldman Cliff Asness’ AQR, continues to have a bad time. It’s November losses bring it to a total decline so far this year of 11.9%.

From the Post:

A giant Greenwich hedge fund continues to get clobbered as volatility whipsaws its computer-generated trading models.

AQR Capital Management’s flagship fund, the $4 billion AQR Absolute Return fund, dropped an additional 5.8 percent in November after a 3.17 percent loss in October. For the year, the fund is down 11.9 percent.

It is a stunning reversal for the formerly high-flying AQR, which boasts of having about $36 billion under management in various quantitative strategies, including just over $11 billion worth of hedge funds…

At one point in July, AQR leaked the fact that it was seriously pondering pursuing an initial public offering, like fellow asset managers Blackstone and Fortress Investment Group.

Needless to say, AQR’s IPO is now a moot point given the mounting losses.

While performance data was not available for AQR’s “long only,” or non-hedge fund-based assets, a recent Pension & Investments interview with AQR co- founding principal Clifford Asness revealed that some of the portfolios had indeed suffered. He also noted that despite the market gyrations, some smaller hedge funds were up 15 percent to 20 percent.
It has been a year unlike any other for AQR and Asness.

Accustomed to being included in lists of the most highly compensated hedge- fund managers, the market dislocations in July caused massive – and embarrassing – losses for AQR and Asness.

In July, AQR – which had booked years of double-digit returns since its inception in 1998 – reported that its quantitative strategies were down 13 percent at one point. While the fund later recouped about 50 percent of the losses, it was the first real black eye for the fund that has come to be publicly identified, along with James Simons’ Renaissance Technologies, with computer-generated stock and futures trading.

An AQR spokesman told The Post that the fund would not comment on “market rumors.” He added that, “[AQR's] management team is proud of its track record in generating returns for investors.”