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Quant Giant AQR Announces More Job Cuts, Blames “Challenging Market Conditions”

Courtesy of ZeroHedge View original post here.

Even the quant firms that emerged as stars of the asset management industry over the past decade are struggling heading into the 2020s.

Quant firm AQR Capital Management, which was founded by billionaire Cliff Asness, is firing up to 20% of its global workforce after investors again pulled money in 2019 during another year of sub-par returns, according to Bloomberg.

The problem with having consecutive years of underperformance in 2018 and 2019 is that 2018 ended with a vicious selloff in December that left benchmarks in the red for the year, while 2019 ended with double-digit returns and stocks at record highs. If your hedge fund can’t outperform in down markets, and it can’t outperform when the S&P 500 is up 30%, then how can you justify LPs paying 2-and-20?

Several firm insiders spoke to the New York Post’s Thornton McEnery, telling the tabloid the reporter that “it’s bad here” – referring to inside AQR’s Greenwich headquarters, where up to 20% of the firm’s headcount was reportedly getting “chopped.” A spokeswoman for the firm insisted that the real number was between 5% and 10%.

The firm’s troubles are clearly bothering its founder, who recently quit twitter, presumably because he was tired of being called out.

Known for his volatile temper, outspoken political beliefs and his odd love of superheros, Asness was known for his frequent twitter spats with industry rivals, members of the business press, and outright trolls.

But on Dec. 30, Asness abruptly deleted his Twitter account, which had amassed more than 40,000 followers. This comes after Asness told an audience at an investment conference back in April that “I do not enjoy managing people, and they do not enjoy being managed by me,” according to the New York Post.

AQR had about 900 employees globally before the cuts. The firm also began 2019 with a spate of job cuts, with Asness reportedly letting go of 10% of staffers. But this year’s layoffs will be bigger.

Cliff Asness

Though they won’t quite keep up with the drop in the firms AUM. As of September, the firm’s AUM was down 20% in 2019 alone.

According to the latest filings, the firm has $270 billion under management, though media accounts claimed that this number is now much lower following a flood of redemptions.

In a statement that probably should have been copy-edited by somebody outside the firm, a senior AQR executive attempts to blame the firm’s missteps on ‘challenging market conditions’ – which is laughable when the market’s response to an Iranian rocket attack is to reach for ever-greater record highs.

“This continues to be a challenging time for the asset management industry,” Suzanne Escousse, AQR’s chief marketing officer, said in an email Wednesday. “After conducting our annual review, we made the difficult decision to reduce headcount to balance the size of our workforce with the current needs of our clients.”

According to the NYP, redemptions at AQR quickened over the summer and into the fall, and it was only a massive infusion of cash from Vanguard, believed to be billions of dollars, that saved Asness from even greater cuts. Asness, the architect of Goldman’s quant trading operation in the 1990s, started the firm in 1998.

AQR isn’t the only hedge fund that’s suffered some bad headlines this week. II reported yesterday that Bridgewater’s flagship fund finished 2019 flat with a 0.5% gain, snapping an 18-year win streak.

The bad news isn’t exactly a surprise. Back in May, Asness said stock picking by quants had been “terrible” in a market where stocks continued to surmount any and all obstacles. In recent months, his firm has sought to sublet space at its Greenwich headquarters.


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