AQR Capital Management [see profile] just launched its eighth mutual fund. The Greenwich, Connecticut-based alternatives manager unveiled the AQR Risk Parity Fund [see filing].
AQR founding principal and client strategies chief David Kabiller praised the new fund for providing "more meaningful diversification and consistent returns over time than traditional approaches."
The new fund has four PMs: Brian Hurst, principal; John Liew, founding principal; Michael Mendelson, principal; and Yao Hua Ooi, vice president. It offers I shares for 95 basis points and N shares for 120 bps.
ALPS handles distribution and transfer agency for the new fund.
Company Press Release
October 4, 2010, Greenwich, CT -- AQR Capital Management, LLC, (“AQR”) announced today the launch of AQR Risk Parity Fund (AQRNX, Class N Shares), the newest addition to its mutual fund family. The new no-load mutual fund, open to retail and institutional investors, began operations on October 1, 2010 with a $10 million investment by AQR. The Fund’s investment objective is to seek consistent total returns with reduced equity market exposure by means of a risk parity asset allocation strategy.
The AQR Risk Parity Fund may offer investors an opportunity to achieve a more diversified portfolio that provides more consistent returns over time by focusing on the allocation of risk rather than the allocation of capital – which is the traditional approach. The goal is to lower investors’ exposure to equity risk and reduce tail risk or volatile downswings.
“We believe it provides more meaningful diversification and consistent returns over time than traditional approaches, a portfolio that is more robust in different economic environments, and an opportunity to improve the risk/return characteristics of an overall portfolio through enhanced returns and reduced risks,” said David G. Kabiller, CFA, Founding Principal and Head of Client Strategies at AQR.
Risk parity strategies may provide improved risk diversification by investing across a broad range of assets to ensure no single asset class dominates the portfolio’s expected performance. The asset allocation is driven by forecasting risk and by increasing exposure to less volatile assets, such as bonds and credit, while decreasing exposure to higher volatility assets such as stocks and commodities. The Fund utilizes futures contracts and related instruments to achieve its objectives.
AQR’s Risk Parity Fund uses a risk budgeting approach to combine a large number of liquid assets into a diversified portfolio, aiming to provide more consistent positive total returns. The fund gives investors access to a broad range of global capital markets, representing over 70 individual exposures across many asset classes using liquid, cost effective instruments to maximize diversification. The strategy seeks to offer investors exposure to a number of global equity, fixed income, commodity, currency, and credit markets.
“The launch of the Risk Parity Fund demonstrates AQR's commitment to providing innovative products to mutual fund investors that have previously been available only to large institutions," said Kabiller. “AQR is uniquely positioned to respond to the demand by the financial advisor community for an expanded range of portfolio diversification strategies.”
The AQR Risk Parity Fund’s Class N shares have a net expense ratio of 1.20%, a gross expense ratio of 1.40%, and will be traded under the ticker AQRNX.
About AQR Capital
AQR Capital Management, LLC is an investment management firm located in Greenwich, CT. The firm's founding principals, Clifford S. Asness, Ph.D., David G. Kabiller, CFA, Robert J. Krail, and John M. Liew, Ph.D., along with several colleagues, founded AQR in 1998. Each of the firm's principals was formerly at Goldman Sachs, & Co., where Asness, Krail, and Liew comprised the senior management of the Quantitative Research Group at Goldman Sachs Asset Management.
AQR manages approximately $29 billion in assets as of 09/30/2010, primarily for institutional investors such as pensions and endowments. The firm offers a broad range of products that include aggressive high volatility market-neutral hedge funds, as well as low volatility benchmark driven traditional products. AQR Funds were created to provide mutual fund investors with access to these alternative and innovative strategies.
AQR’s mutual fund offering includes Diversified Arbitrage Fund (ADANX); International Equity Fund (AQINX); Global Equity Fund (AQGNX); Momentum Fund (AMOMX); Small Cap Momentum Fund (ASMOX); International Momentum Fund (AIMOX); Managed Futures Strategy Fund (AQMNX).
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Foreign investing involves special risks such as currency fluctuations and political uncertainty. The use of derivatives, forward and futures contracts, and commodities exposes the Fund to additional risks including increased volatility, lack of liquidity, and possible losses greater than the Fund’s initial investment as well as increased transaction costs. This fund enters into a short sale by selling a security it has borrowed. If the market price of a security increases after the Fund borrows the security, the Fund will suffer a potentially unlimited loss when it replaces the borrowed security at the higher price. Short sales also involve transaction and other costs that will reduce potential Fund gains and increase potential Fund losses. When investing in bonds, yield and share price will vary with changes in interest rates and market conditions. Investors should note that if interest rates rise significantly from current levels, bond total returns will decline and may even turn negative in the short term. There is also a chance that some of the fund’s holdings may have their credit rating downgraded or may default. Actual or realized volatility can and will differ from the forecasted or target volatility described above.
This Fund is not suitable for all investors. The Funds may attempt to increase its income or total return through the use of securities lending, and they may be subject to the possibility of additional loss as a result of this investment technique. The Fund is new and has less than a year of operating history.
An investment in any of the AQR Funds involves risk, including loss of principal. The value of the Funds’ portfolio holdings may fluctuate in response to events specific to the companies in which the Fund invests, as well as economic, political or social events in the United States or abroad. Please refer to the prospectus for complete information regarding all risks associated with the Funds.
An investor considering the Funds should be able to tolerate potentially wide price fluctuations. The Funds are subject to high portfolio turnover risk as a result of frequent trading, and thus, will incur a higher level of brokerage fees and commissions, and cause a higher level of tax liability to shareholders in the Funds. The Funds may attempt to increase its income or total return through the use of securities lending, and they may be subject to the possibility of additional loss as a result of this investment technique.
Investors should carefully consider the investment objectives, risks, charges and expenses of the Funds before investing. To obtain a prospectus containing this and other important information, please call 1-866-290-2688 or download a prospectus online at www.aqrfunds.com. Read the prospectus carefully before you invest.
The Fund is less than one year old and has limited operating history. Diversification does not eliminate the risk of experiencing investment losses.
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