Cliff Asness Said to Buy Value. The Market ‘Quickly and Violently’ Punished Him. The AQR co-founder admits that tilting toward the value factor has been “incredibly” painful this year. Amy Whyte February 20, 2020 Cliff Asness (Patrick T. Fallon/Bloomberg) Three months ago, Cliff Asnessannouncedthat it was time for investors to “sin a little” by tilting their portfolios toward the long-suffering value factor. That bet was “quickly and violently” punished, the AQR Capital Management co-founder said Wednesday. In ablog poston AQR’s website, Asness noted that higher exposures to the value factor were “incredibly punished” during the first six weeks of this year. “Value has started 2020 with an extremely severe loss versus very long-term history, and, defined in a wide variety of ways, the worst loss yet… over the entire long 2010-2020 value drawdown,” he wrote. Citing the performance of the Russell 1000 growth and value indexes, the factor investor said that the cumulative daily return difference between the two strategies was -6.4 percent — putting value’s underperformance below the third percentile for all periods since 1991. “Of course, that includes such famous events as the technology bubble of 1998-2000 and the GFC of 2008-2009,” Asness wrote. “If you only look at 2010 to today, this is the zeroth percentile event. That is, in a decade quite bad for value investing, the start of 2020 is the absolute worst 6-week period.” The same comparison “yields nearly identical results” for small-cap stocks, and other measures of value performance made the last six weeks look similarly bad, according to Asness. Even AQR’s proprietary value factor — which performed well from 2010 to 2017 — “sadly fared quite similarly” at the start of 2020, the AQR co-founder said. “These (we believe) better versions of value have helped long-term and during most of the value drawdown,” Asness wrote. “But they have decidedly not helped during these last two years.” Companies with higher growth potential in a slow growth world[/paste:font] [IIDeep Dive:Why Value Investors Shouldn’t Expect a ‘Massive’ Comeback] Despite this immediate rebuke for committing the “venial sin” of factor timing, Asness said that AQR won’t be making many “big changes” to its investment process. “We’re executing our preferred strategy of not making panicky changes to our process that would have (note the tense) alleviated recent pain,” he wrote. “Nothing has changes save value has gotten cheaper this year.” He added that the quant firm would “continue to watch value spreads, and consider doing a bit more of a tilt if they ever, which we hope not to see but will persevere if necessary, get to tech bubble levels.” While Asness has, in his words, been a “pooh-pooher” of comparisons between the current market environment and the tech bubble, he acknowledged that it is “getting very bubbly out there.” “We’ve seen this movie before a few times and we know how, but definitely not when, it ends,” the AQR co-founder concluded. “We believe that sticking with the process is the only way to achieve the long-term gains we seek.” https://www.institutionalinvestor.c...The Market Quickly and Violently Punished Him
My belief: if a stock is still cheap (from a valuation standpoint) after 11 years of NIRP, ZIRP, QE, etc, then there is a 95% chance that the company has serious problems. If this was 2011, it would be a different story - but if a company is still hated today, there is probably a damn good reason for it.
%% So called ''value'' stocks almost always does, not so good................................................
Layoffs Watch ’20: AQR Capital Management Dozens of miserable Cliff Asness underlings are celebrating their involuntary emancipation. Jon Shazar Jan 9, 2020 https://dealbreaker.com/2020/01/aqr-layoffs-2020 Cliff Asness has acknowledged that he doesn’t like managing people, and “they do not enjoy being managed by me.” Which I guess means that there are between 45 and 180 very lucky people this week. “It’s bad here,” one AQR insider told The Post. “We’re hearing 15-20 percent of headcount getting chopped.” Contacted Wednesday by The Post about the layoffs, a spokeswoman for the Greenwich, Conn.-based quant fund insisted the bleeding was limited to between 5 and 10 percent of its global headcount of 900. This is AQR’s second annual “we sucked this year” set of pink slips, and AQR sucked even more last year than the one before. Assets under management are down by 20% and redemption requests are rolling in as performance suffers (not that Asness didn’t warn you about that). If this keeps up, there could be hundreds of additional people enjoying life a little bit more in the months and years ahead. Cliff Asness’ giant hedge fund AQR is slashing staff [Thornton/N.Y. Post]
Value investment isn't about finding perfect flawless companies selling for pennies on the dollar, it's about finding value. A good value buy could be where the market is pricing in an 80% chance of bankruptcy but the actual odds are only 50-50. Right now you can buy Chinese blue chips with earnings yields of 10% - certainly seems like a better long-term bet than chasing Apple higher. The skilled value investors I follow are still finding plenty of opportunity, and the future looks bright thanks to the rise of passive indexing and ETFs. Fewer active managers means less competition, while the use of automated systems and mechanical screening criteria creates large inefficiencies for skilled analysts to exploit. The fact that there's such a thing as a "value factor" is proof positive, as if all the complexity of an actual operating business can be captured, let alone projected into the future, by a few headline numbers.
The idea that historical backtesting of fundamental factors can give you an edge is irretrievably flawed... The world has changed and it is changing as we speak... "Sin a little"? This is not going to end well