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Perspective

Hedging on Hedge Funds (postscript on correlations, beta, and “alpha”)

After Cliff's last piece on hedge funds, there were a lot of questions about “beta” versus “correlation” with the market and, more generally, about “alpha.” He demonstrates why correlation and beta are not the same.

Perspective

Hedge Funds: The (Somewhat Tepid) Defense

Some pension plans’ recently deciding to eliminate their hedge fund programs led us to review some of AQR’s long-standing comments on the industry—that they should be more fully hedged, more transparent, and delivered at a lower fee.

Perspective

Response to Miles Johnson

Cliff disagrees with the ways certain members of the press have established their annual lists of the top hedge fund earners. In his view, the math was simply bad and intentionally misleading.

Book

Consistency of Carry Strategies in Europe

In this chapter, we focus on strategies in the European bond market that shift money from government bonds to higher-yielding credits. While most carry strategies seem to add value in the long run, some strategies appear more risky than others.

Journal Article

Betting Against Beta

A basic premise of the capital asset pricing model (CAPM) is that all agents invest in the portfolio with the highest Sharpe ratio, or expected excess return per unit of risk, and leverage or de-leverage this portfolio to suit their risk preferences. However, many investors — such as individuals, pension funds and mutual funds — are constrained in the leverage that they can take, and therefore overweight risky securities instead.

Journal Article

An Alternative Future: Part I

Depending on whom you ask, hedge funds are either the wave of the future or a dangerous fad that has been grossly overcapitalized, and all will end in ruin.

Book

Challenges and Innovation in Hedge Fund Management

The increasing institutionalization of hedge funds brings with it many challenges. AQR's Cliff Asness provides an assessment of key issues that arise as a consequence, focusing on the areas of benchmarking, transparency, fees, and risk management.

Alternative Thinking

The Role of Alternative Beta Premia

Alternative beta premia—dynamic long-short strategies—offer effective diversified sources of return. To us, the most useful classifications are hedge fund strategy premia and style premia, two complementary approaches

Journal Article

An Alternative Future: Part II

In Part 1 of "An Alternative Future," I articulated a vision of hedge funds plus traditional index funds replacing traditional active management as the investing model of the future.

Journal Article

Sources of Change and Risk for Hedge Funds

Hedge funds are becoming much more institutionalized.