AQR Capital Management, founded in 1998, is a leader in quantitative investment strategies, blending academic insights with innovative methods.
Table of contents
- Introduction
- AQR Capital Management: Founding and early development
- AQR Capital Management: Investment philosophy and strategies
- Key strategies of AQR capital management
- AQR Capital Management: Academic integration and contributions
- AQR Capital Management: Recognition and workplace culture
- Final thoughts
AQR Capital Management, short for Applied Quantitative Research, is a global leader in investment management, headquartered in Greenwich, Connecticut, United States. The firm was founded in 1998 by a team of four visionary financial experts: Cliff Asness, David Kabiller, John Liew, and Robert Krail.
Renowned for its quantitatively driven approach, AQR offers a variety of alternative and traditional investment strategies tailored for institutional clients and financial advisors worldwide. Over two decades, the firm has expanded its presence globally and pioneered several innovative strategies, blending academic rigour with practical application.
AQR operates as a truly global organisation, serving clients across continents. Beyond its Greenwich headquarters, the firm has offices in key financial hubs, including, Boston, Chicago, Los Angeles, Bangalore (engineering centre established in 2018), Hong Kong, London, Sydney, Tokyo, and Germany.
AQR Capital Management: Founding and early development
The foundation of AQR was deeply rooted in academia. Three of its four founders—Cliff Asness, Robert Krail, and John Liew—met at the University of Chicago’s PhD programme, where they explored and developed concepts that would later underpin AQR’s investment philosophy. Asness, during his doctoral studies, focused on momentum and value investing, areas that became central to AQR’s strategies.
Before founding AQR, Asness joined Goldman Sachs, where he was tasked with leading a new quantitative research team in the firm’s asset management division. Joining him were Krail and Liew, forming a team that applied their academic expertise to real-world investment challenges. In 1998, the trio, along with David Kabiller, decided to leave Goldman Sachs and establish AQR Capital Management.
From its inception, AQR distinguished itself by voluntarily registering with the Securities and Exchange Commission (SEC), a rare move for hedge fund managers at the time. The firm’s first offering was a hedge fund, which demonstrated its capability to implement quantitative strategies effectively. By 2000, AQR diversified into traditional portfolio management, demonstrating its versatility and broadening its client base.
AQR has experienced significant growth since its inception. While the firm faced challenges, such as a 34% drop in annual profits in 2018, it has continually adapted through innovative strategies and global expansion. Key milestones in the firm’s AUM include:
- 2001: $750 million
- 2004: $12 billion
- 2009: $20 billion
- 2017: $224 billion (peak AUM)
- 2023: $99 billion
AQR Capital Management: Investment philosophy and strategies
AQR’s investment philosophy is built on three foundational principles:
- Fundamental investing: Leveraging sound economic theory, AQR constructs strategies designed to deliver long-term, repeatable results. The firm believes in identifying persistent, robust sources of return based on extensive research.
- Systematically applied: A disciplined and data-driven methodology underpins all of AQR’s strategies. This approach emphasises consistent portfolio construction through an iterative process of design, testing, and refinement.
- Thoughtfully designed: Every aspect of the investment process, from portfolio construction to risk management and trading, is meticulously planned using both quantitative and qualitative tools.
Key strategies of AQR capital management
AQR is widely recognised for its innovative strategies, which cater to diverse client needs. The firm focuses on the following areas:
- Style (Factor) investing: As an early adopter of style investing, AQR harnesses factors such as value, momentum, defence, and carry to build diversified portfolios. These styles, drawn from decades of academic research, are combined to enhance diversification and potential returns.
- Risk parity strategy: One of the first firms to offer this approach, AQR allocates investments based on risk rather than asset class, ensuring balanced exposure and reduced portfolio volatility.
- Managed futures: This trend-following strategy takes advantage of price and fundamental trends in both traditional and alternative asset classes, providing low correlation to equity markets.
- Alternative Mutual Funds: In 2009, AQR became one of the first firms to introduce alternative strategies in a mutual fund format, making sophisticated investment approaches accessible to a broader audience.
- Arbitrage strategies: AQR offers convertible, merger, and event-driven arbitrage strategies, aiming to capitalise on pricing inefficiencies in financial markets.
- Equity Market Neutral: AQR employs a multi-factor approach to select global stocks while maintaining market neutrality.
- ESG strategies: Committed to sustainability, AQR integrates Environmental, Social, and Governance (ESG) factors into its investment processes, helping clients achieve their ESG objectives.
AQR Capital Management: Academic integration and contributions
AQR’s strong ties to academia are evident in its operations and initiatives. Approximately half of AQR employees hold advanced degrees, with 52 PhDs as of 2016. The firm has introduced several programmes and partnerships to further academic research and professional development:
- QUⱯNTA Academy: Launched in 2015, this programme offers technical, leadership, and personal enrichment courses, fostering lifelong learning for employees.
- AQR Asset Management Institute: In partnership with the London Business School, this initiative supports asset management research and rewards scholars through grants and prizes. AQR pledged $15 million over ten years to this initiative.
- AQR Insight Award: Founded in 2011, this award honours innovative academic papers with practical applications in investment management, offering a $100,000 prize to winners.
- Top Finance Graduate Award: Sponsored by AQR at the Copenhagen Business School, this award recognises PhD graduates whose research shows exceptional potential impact.
AQR Capital Management: Recognition and workplace culture
AQR is celebrated not only for its investment strategies but also for its workplace environment. Highlights include:
- Human Rights Campaign Corporate Equality Index: AQR earned a perfect score from 2019 to 2023, reflecting its commitment to LGBTQ+ workplace inclusion.
- Pensions & Investments Best Places to Work in Money Management: Recognised consecutively from 2017 to 2023, AQR is acknowledged for fostering an inclusive and innovative culture.
Final thoughts
AQR Capital Management is a global pioneer in quantitative investment management, driven by a blend of academic insight, technological innovation, and practical application. Over its 25-year history, the firm has redefined traditional and alternative investment strategies, offering unparalleled diversification and resilience.
With its global presence, commitment to research, and client-centric approach, AQR continues to shape the future of investing, maintaining its position as a trusted partner for institutional investors worldwide.
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