AQR’s Longest-Running Strategy Has Best Month Ever on Value

(Bloomberg) -- AQR Capital Management’s longest-running quantitative fund posted its best month ever in January as Cliff Asness’s faith in value stocks paid off.

His firm’s Absolute Return strategy advanced 15.4%, according to a person familiar with the matter, who asked not to be identified discussing returns. The fund started in 1998. AQR’s Equity Market Neutral Global Value strategy gained 22.3% in the month. 

A renowned proponent of value, Asness said the rotation from value could be volatile. In a presentation to investors Tuesday, he said growth stocks may have gotten so far ahead of value stocks in the past year or two that there’s an even wider gap than in 1999. That could bring about a reversal similar to what occurred after the dot-com bubble burst.

“We’re excited going forward but we know it’ll be bumpy,” Asness said.

Value’s strength isn’t necessary linked to rising interest rates, he said. While value has had a moderately strong relationship to the 10-year Treasury in the past decade, the relationship over the past 40 years is weaker, AQR research shows.

Even if that relationship held up, Asness estimated that it would take a 300 basis point rally in the 10-year Treasury for value to become a losing trade.

“I am very strongly in the value camp now,” he said in the presentation. “But I am a little paranoid about being named the value guy for the rest of my career” given that the fund trades other strategies, including momentum, he said.

“We’re more value than we usually are, but by no means does that make the whole process value,” he added.

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