Interview, Fireside Chat
Cliff Asness, Founder, Managing Principal, and Chief Investment Officer of AQR Capital Management
- Individuals whose career choices are driven by current popularity rather than intrinsic interest are predicted to fall three to five years behind in field progression.
- Hedge fund fees are expected to continue trending downward from the historical "two and 20" standard, with high fees for non-proprietary strategies viewed as unsustainable in a competitive market.
- Long-only clients holding short-term views of absolute return or market neutral assets are projected to face disappointment due to the contradiction between their "always goes up" expectations and historical data.
- Charging considerably lower fees for style exposures compared to true alpha is forecast as the correct call for long-term sustainability, whereas pricing high fees for known strategies is expected to fail.
- The value factor, currently experiencing above-normal returns, is predicted to undergo a multi-year reversion to historical norms, specifically within a two to three year timeframe for continued elevated performance.
- Trend following strategies carry modest positive expected returns but are warned to function only usually rather than always, particularly if market conditions change abruptly.
- The aggregate average alpha in the market is mathematically expected to remain zero, implying that as the top quartile of managers declines, the overall market spread must balance out.
- The private equity asset class is anticipated to experience serious deterioration as investors increasingly purchase it to smooth return appearances rather than for primary return generation.
- The universe of long-only managers is projected to shrink as the economy presumably requires fewer professionals dedicated to determining asset valuations.
- A return to normalcy is forecast to occur, marking an end to the era of very cheap money that characterized the ten years following the Global Financial Crisis.
- Governments are expected to retain the ability to prevent cryptocurrency from dominating, with a high probability that regular money will remain the primary medium of exchange.
- Professionals are advised to avoid shifting careers to chase hot trends, as a fizzle of such trends will set career advancement back by three to five years.
- While a profit-maximizing strategy for non-proprietary alpha involves charging maximum fees before exiting, this approach is explicitly noted as not being the speaker's plan.