Amid the COVID-19 pandemic, 54-year old investor and billionaire, Cliff Asness has watched as $43 billion disappeared from his company.
“That’s pretty bad,” a hedge fund manager told The New York Post. “Things are bad out there, but $43 billion is a death signal,” he said.
Asness’ firm AQR Capital Management was managing $186 billion by the end of 2019. As of March 31, it was managing assets worth $143 billion.
However, it is unclear how much of the 23 percent drop is due to investor withdrawals, even though Asness has been suffering from redemptions since 2019 due to sagging performance.
According to AQR’s website, returns have worsened this year for some of Asness’ funds due to the COVID-19 pandemic.
Asness has pointed out before that timing the market can be “deceptively difficult”. However, he now thinks that now may be the time to use factor timing, especially when it comes to value stocks.
Factor timing is an investment strategy that chooses securities based on attributes that are associated with higher returns.
It is only recently that Asness believes that value stocks have gotten cheap enough to be worth trying to time factors, even though value factors have performed badly since the financial crisis.
“For the first… most versions of the value factor underperformed largely because the fundamentals (earnings, cash flow, sales, and margins) worked against value,” he wrote in a paper posted on AQR’s website in November.
He added that such losses are not fun but investors get a “consolation prize” in that the factors are much cheaper.
According to reports, Asness, who is known for smashing computer screens when displeased, has scowled in the face of redemption threats before.
The coronavirus has shattered businesses and sent Asness’ hedge fund peers down an average of 7.3 percent in the first quarter of 2020, according to performance tracker Hedge Fund Research.
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In January, AQR reduced its staff by up to 10 percent as investors redeemed funds in the wake of 2019’s poor results.
A spokesperson from AQR told The New York Post that the company had no layoffs planned for the second quarter of 2020.
Industry watchers think that even though investors across the board have suffered this year due to COVID-19, the declines at AQR, which manages both hedge funds and traditional stocks and bond funds, stand out.