A Paradigm Shift in Investing GREENWICH, Conn., July 10
GREENWICH, Conn., July 10 /PRNewswire/ -- AQR Capital Management, LLC ("AQR") today launched the AQR Momentum Indices, a new set of indices that capture the returns of stocks that have positive "momentum." A stock has positive momentum if it has outperformed its peers on a relative basis over the recent past.
The three indices are: AQR Momentum Index, AQR Small Cap Momentum Index, and AQR International Momentum Index. In conjunction, AQR also introduced a set of three no-load mutual funds based on these indices: the AQR Momentum Fund, AQR Small Cap Momentum Fund, and AQR International Momentum Fund.
"When the world thinks about diversifying portfolios, the conventional approach has been to think in terms of two style dimensions - value versus growth, and large cap versus small cap. However, there is another dimension which is just as important in explaining returns, and has been largely under-allocated given the current two-style investment paradigm; this is momentum," said David G. Kabiller, CFA, Founding Principal and Head of Client Strategies at AQR.
Momentum has been researched extensively over the past fifteen years by both academics and practitioners. In contrast to the efficient market hypothesis, which maintains that past stock prices have no predictive value for the future, the research on momentum suggests that stocks with positive momentum tend to out-perform market averages in the following months.(1)
The new AQR Momentum Indices provide a simple and transparent(2) way of capturing the momentum effect. The indices, which are rebalanced quarterly, are formed by including those stocks that rank in the top third of their relevant universe based on momentum over the prior twelve months.
"What makes momentum such an attractive strategy is that it combines two desirable qualities: momentum tends to do well when value is out of favour, yet unlike growth its long-run returns have out-performed broad market averages(3)," said Kabiller. "We believe that a combination of value and momentum is a better way to build diversified portfolios than the more traditional value and growth combination."
AQR is an intellectual leader in the field of momentum investing. As a doctoral student, AQR founder Cliff Asness was one of the early academic writers on the concept, and the AQR team has extensive experience implementing momentum strategies in actual portfolios(4).
"Momentum is an investment concept that has been known and researched for years, but the strategy has not been easily accessible to investors in its pure form, and consequently most investors are substantially under-invested," continued Kabiller. "AQR is introducing the Momentum mutual funds as a cost-effective way to access this proven approach. The launch of these new funds furthers our efforts to provide clients with innovative ways to gain diversification for their portfolios."
The funds have a minimum investment of $5,000, and net expense ratios ranging from 0.49% to 0.65%. The funds began operations yesterday, with assets of $2 million each. The AQR Momentum funds follow the launch of AQR's first mutual fund, the AQR Diversified Arbitrage Fund, earlier this year.
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. The use of derivatives exposes the Funds 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. Securities with positive momentum generally will be more volatile than a broad cross-section of securities. In addition, there may be periods when the momentum style is out of favor, and during which the investment performance of a Fund using a momentum strategy generally will suffer. The Small Cap Momentum Fund emphasizes investments in smaller companies and will generally experience greater price volatility. The International Momentum Fund invests in foreign securities, which involve special risks such as currency fluctuations and political uncertainty. Please refer to the prospectus for complete information regarding all risks associated with the Funds.
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.
AQR Funds are distributed by ALPS Distributors Inc. There are risks involved with investing including the possible loss of principal. Past performance does not guarantee future results. Cliff Asness and David Kabiller are registered representatives of ALPS Distributors Inc.
[AQR000153, expiration date 7/10/10.] (C) AQR Funds. All rights reserved.
You cannot invest directly in the AQR Momentum Indices. Index performance does not represent actual fund or portfolio performance. A fund or portfolio may differ significantly from the securities included in the Index. The information provided is not intended for trading purposes, and should not be considered investment advice.
AQR Momentum Indices are the exclusive property of AQR Capital Management, LLC ("AQR"), which has contracted with Standard & Poor's Financial Services LLC ("S&P") to maintain and calculate the Indices. Standard & Poor's(R) and S&P(R) are registered trademarks of S&P.
"Calculated by S&P Custom Indices" and its related stylized mark(s) are service marks of S&P and have been licensed for use by AQR. S&P and its affiliates shall have no liability for any errors or omissions in calculating the Indices. CFA is a trademark owned by the CFA Institute.
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 $20 billion(5) in assets, 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 funds investors with access to these alternative and innovative strategies.
(1) There have been over 300 papers published on momentum since the original papers by Jegadeesh and Titman, "Returns to Buying Winners and Selling Losers: Implications for Stock Market Efficiency," Journal of Finance (1993) and Asness, "Variables that Explain Stock Returns," Ph.D. Dissertation, University of Chicago (1994).
(2) The detailed index methodology is available at www.aqrindex.com.
(3) See footnote 1, as well as Fama and French, "Common Risk Factors in the Returns on Stocks and Bonds," Journal of Financial Economics (1992).
(4) AQR has been trading momentum-based strategies, among other strategies, since its inception in 1998.
(5) As of 6/30/09
SOURCE AQR Capital Management, LLC
