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The Return of Value Continues to Boost AQR’s Performance

The multi-strategy and alternative equity mutual funds were some of the biggest beneficiaries of the value comeback.

AQR proved itself again last month.

The global investment firm posted positive returns across multiple strategies in May, according to a source familiar with the firm. AQR’s longest-running multi-strategy, absolute return, achieved a 4.5 percent net-of-fee return in May. Its equity market neutral global value strategy posted a 13.2 percent return last month and a 52.5 percent return year-to-date, according to the source. 

AQR’s outperformance came as value stocks continued to beat growth amid fears of recession and heightened volatilities. Since January, the firm has reaped rewards from its value factors in the equities book, even as the public markets lingered close to bear-market territory. AQR’s outperformance in May was also heavily dependent on its commitment to value stocks. 

In mid-May, AQR’s co-founder Cliff Asness said he was confident about the continuing outperformance of value stocks, although he said that there would be some bumps in the road ahead. In a Morningstar podcast last week, he argued that value stocks are still trading at a significant discount compared to growth equities. 

AQR’s multi-strategy and alternative equity mutual funds were some of the biggest beneficiaries of the value comeback. The style premia alternative fund and equity market neutral fund both ranked first for year-to-date returns in their respective category, according to Morningstar. The former generated 36.3 percent this year, while the overall multi-strategy category recorded a loss of 1.2 percent. Equity market neutral returned 28.1 percent year-to-date, outrunning the average peer by almost 24 percentage points. 

The diversifying strategies fund delivered 3 percent in May, with its year-to-date return of 14.1 percent ranking third in Morningstar’s multi-strategy category. The long-short equity fund generated 7.1 percent last month, with a 22.5 percent return year-to-date.

AQR’s managed futures strategies and risk-balanced commodities strategies also outperformed peers. According to the source, this was due to “an overall environment featuring strong trends across asset classes and increased inflation concerns.” For example, the Managed Futures Strategy HV Fund returned 41.2 percent year-to-date and is in the top 5 percent of Morningstar’s systematic trend category. 

Asness stressed that AQR isn’t dependent on just value. “If value loses because the companies underperform on the fundamentals, that’s bad for a pure value investor. But we're not pure value, as most investors aren’t,” he said in the podcast. “A lot of the other things we believe in — quality firms, fundamental momentum — can kick in and help you.”

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