Cliff Asness speaking at a previous Morningstar conference.
After a multi-decade long slope upward in performance, AQR took a hit in 2018, and Founder and Managing Director Cliff Asness, who opened Thursday's Morningstar Conference with a keynote session "Understanding Intuition in Quant Investing," began with a mea culpa. From there, the speech, interspersed with wry humor, broke down the workings of factor and multi-factor investing, and why multi factor is better.
"When quant strategies lose, it's often hard to understand why … Feels like black box when losing," he told the audience.
In explaining multi-factor (smart beta, a term he hates) investing, he used only two factors: value and momentum, and how they work together. He noted they use other factors, such as carry, defensive, trend and volatility, and apply them to markets beyond stocks: fixed income, futures, currencies and commodities.
