AQR creates mutual fund using nine hedging strategies

AQR Capital Management LLC is tapping into the growing appetite for alternative investments by launching a mutual fund that employs nine different hedge fund strategies. The AQR Multi-Strategy Fund (ASANX), which will start trading on Monday, is designed to have low correlation to the broader stock and bond markets, according to David Kabiller, founding principle and head of client strategies. “With this fund we’re getting back to the roots of what absolute return is supposed to do,” he said. AQR, which has $41 billion under management, modeled the new fund after one of its existing hedge fund strategies with a proven track record in weathering market storms. For example, during the last three months of 2008 when the financial crisis led to a 22.5% drop by the S&P 500 Index, the AQR hedge fund strategy generated a 7% gain, according to Mr. Kabiller. Because of liquidity constraints, the mutual fund will not be identical to the hedge fund version, but the general investment strategy is the same. The fund will allocate assets to the following strategies, each of which will be managed by AQR: Convertible-arbitrage, fixed-income relative value, event-driven, dedicated short bias, equity market neutral, long-short equity, emerging-markets, global macro and managed futures. Each of the underlying categories will be allocated based on risk. “We start with equal risk in each strategy, and then we allow ourselves to tactically determine how much exposure we want to take between the set of nine,” Mr. Kabiller said. “We have developed our own metrics for making those decisions.”