Trend, Momentum and Factors

On 8 May 2020 Cliff Asness published an essay under a question his clients had been asking for two years: "Is (Systematic) Value Investing Dead?" His answer was "No it's not." It was an expensive answer to give. AQR Capital Management, the Greenwich, Connecticut firm Asness had founded in 1998 with David Kabiller, John Liew and Robert Krail after leaving Goldman Sachs Asset Management's quantitative research group, was the firm that published the factors it traded: value, momentum, carry, defensive, quality and trend, across stocks, bonds, currencies and commodities. In 2018 it managed a reported ~$226 billion with about 1,000 employees (Institutional Investor; Forbes). Then value, buying cheap stocks and shorting expensive ones, had one of the worst runs in its recorded history, and the first quarter of 2020 was reported as the worst quarter on record for the factor.

AQR's flagship Absolute Return fund fell more than 30% from its 2018 peak to its 2020 trough, and Style Premia Alternative lost 22% in 2020 (Institutional Investor, reported). Firm profit fell 34% in 2018 (Bloomberg, reported). Assets roughly halved, about one-third from performance and two-thirds from client withdrawals, to $143 billion in 2020 and about $99 billion at the start of 2024, and about 40% of the staff left through layoffs and attrition. "The most painful thing in my entire life," Asness said later, "was having to shrink the firm" (Institutional Investor, September 2024). AQR did not abandon the factor. It cut costs and held the positions, which its models said had become more attractive as they lost.

Then value paid. Absolute Return gained 16.8% in 2021, 43.5% in 2022, its best year since 1998, and 18.4% in 2023 (Institutional Investor, reported; net basis to verify), and firm assets were reported at about $187 billion at the end of 2025 (Forbes). The rebound supports AQR's view for this episode without settling the long-run question, and it came too late for the clients who had left.