AQR’s managed futures offering has garnered quite a bit of assets in the Liquid Alt section of managed futures “40 Act” funds (aka mutual funds) over the past two years. Since the inception of AQR’s Managed Futures Strategy I ($AQMIX) in Jan ’10, they’ve gone from $0 to $6.6 Billion in assets as they’ve canvassed the country with wholesalers pitching famous quant Cliff Asness’ products. It doesn’t hurt, either, that Cliff is everywhere… Connie Mack interviews, Investment News conferences, CNBC appearances, etc.)
One investment advisor we talked to invested in $AQMIX said he invested because he liked the story about Cliff Asness in “The Quants” punching his computer. That’s one way to pick investments… just don’t tell your clients.
Now, whenever we see popular liquid alts like this gaining steam (see 361 Capital’s here), we wonder just how well they stack up against real managed futures managers, you know, the one’s doing separately managed accounts and privately offered funds. High Net Worth Individuals can invest directly in such managers through folks like Attain, while advisors typically need to access through privately offered funds (CPO), as once it’s a fund, it becomes a security, making them licensed to sell it and it able to show up on the client’s statements. PS – There’s a little group we know doing some good stuff in the privately offered fund space, see here.
But all this leads to the question of how do the Liquid Alts like the gorilla of a fund, AQMIX, stack up against the privately offered stuff.
We know there is a liquidity premium in private equity and some other hedge fund categories (to the benefit of the privately offered stuff), but does that hold in the world of exchange traded futures. What if there was a website (we’re working on it!) that listed the public options right alongside the ‘private’ – how would AQR’s Managed Futures Strategy I asset raising machine look alongside its sorta-peers on that side:
We went to work ‘adding’ the AQR managed futures mutual fund (AQMIX) into our database as if they were a privately offered option, and then seeing how their performance stacks up against the top tier performers in the privately offered space. Bear in mind our database doesn’t include all possible programs in the managed futures universe, we pare down the publicly available lists to get rid of programs which aren’t investable, offshore funds, and others which aren’t valid business concerns; so our database may have a bit of a skew towards better managers.
So… they raise money like a top quartile fund, but are they performing like one? Here’s what we found:
(Disclaimer: past performance is not necessarily indicative of future results. Programs that make up “Top Decile Average” consist of those with at least a 3 year track record tracked by Attain Capital Management for investment by clients via managed accounts and do not represent all available programs in the managed futures universe. Performance as of 10/31/2014)
AQR is two months shy of 5 years of performance, and the 5 year ratios reflect numbers since inception (58 months).
We found they are definitely in the top decile in terms of assets, where they would be the 3rd largest privately offered managed futures program, behind Winton and Man AHL. But they lag the top decile of performers in most metrics by quite a bit… which begs the question… why are you doing Liquid Alts in the first place? If it’s because you only have $5,000 to invest into managed futures – we agree, you shouldn’t be trying to do a managed accounts and commodity pools. But if you have a few extra zeroes at the end of your alternatives allocation (say $50,000 to $500,000), basing your allocation choice on ease of use and access (no K1, daily liquidity, etc.) might be a case of stepping over dollars to pick up pennies.
Maybe it isn’t fair to compare AQMIX to the best performers in every category, but with large assets comes large expectations….
December 1, 2014
I think comparing major programs to the AQR MF HV version (QMHNX) would make for a more appropriate comparison in terms of vol targets. Obviously the track record for the higher octane version of the fund is somewhat shorter, still a valid option if your 401k or IRA don’t allow for MAs or CPOs.
December 2, 2014
Thank you for information about AQMIX and your comparison of its performance to mgd futures programs. I especially enjoy learning about “developments” in the mgd futures industry as well as the way the public and some pros perceive them. I suspect that for many, including pros, mgd futures are so amazingly different from securities investments that they can’t get very close at all to understanding them. That must be a reason why the propaganda against commodities/futures has endured so persistently. (I’m not condemning the propaganda; it provides the availability of superb, high performance AND low risk programs to be there to invest in, instead of immediately being scooped up by institutions.)
Thanks again, Attain. You help to direct toward the light.
December 5, 2014
Thanks for the quick analysis. I agree with Colin, in that the fund’s vol really needs to be taken into account with the comparison. Although I asked Fidelity about investing in the HV version of AQR, and they insisted on a $1m minimum – might as well go private if I had that kind of $$.
The Sortino *somewhat* shows the effect of risk-adjusted returns, such that it becomes plain that AQR’s ability to raise assets is not based on past performance. But I wonder what the performance looks like versus the median program in your DB – I have a hunch a flat performance in the past 5 years probably isn’t *that* far from median.
Definitely a fan of the new mutual funds coming out – there are a lot of folks with <$1m AUM (i.e. not Accredited Investors) who could benefit from a $25,000-$50,000 investment in managed futures.
https://financialpiggy.wordpress.com/2014/09/26/latest-addition-to-the-portfolio-managed-futures-mutual-fund/