For faint of heart, AQR launches funds with beta blockers

JUL 17, 2012
Boutique alternatives shop AQR Capital Management has launched three funds that put a defensive spin on equities. The AQR Emerging Defensive Equity Fund (AZEIX), AQR International Defensive Equity Fund (ANDIX) and AQR U.S. Defensive Equity Fund (AUEIX), each will invest in low-beta, high-quality companies in their respective regions. They are designed to deliver equitylike returns without equitylike volatility, principal David Kabiller said. “There's a lot of risk aversion from advisers right now,” he said. “Given the outlook for the next three to five years, it's easy to understand why.” Investors have sought equity strategies that focus on low volatility. The PowerShares S&P 500 Low Volatility ETF (SPLV) has grown to more than $2 billion in assets since its launch 14 months ago. A series of other low-volatility exchange-traded funds have followed in its wake. Unlike passively managed low-volatility ETFs, which weight stocks based on past volatility, the AQR funds are actively managed and will use a series of fundamental screens, such as earnings-per-share volatility and low leverage, in addition to beta. “Low-beta stocks tend to have the same characteristics as high-quality stocks,” Mr. Kabiller said. Several studies have shown that over long time periods, stocks with low volatility tend to outperform. The PowerShares S&P 500 Low Volatility ETF had a 9% return for the one-year period ended June 30, compared with 1.63% for the S&P 500. Low-volatility strategies are likely to underperform during market rallies. During the fourth and first quarters, the S&P 500 gained 12%, while the return on the PowerShares ETF was half that. [email protected] Twitter: @jasonkephart

Latest News

FINRA fines Vanguard $950,000 over decade of cost basis errors
FINRA fines Vanguard $950,000 over decade of cost basis errors

Faulty Forms 1099 and account statements reportedly left some Vanguard brokerage customers overpaying or underpaying taxes for over a decade.

More ETFs, more opportunity, more homework
More ETFs, more opportunity, more homework

The democratization of ETFs cuts both ways

Advisor moves: Raymond James, Baird add significant teams in latest recruiting push
Advisor moves: Raymond James, Baird add significant teams in latest recruiting push

Independent broker-dealers snap up experienced advisors as competition for established practices intensifies.

Wells Fargo names COO Scott Powell as its next chief risk officer
Wells Fargo names COO Scott Powell as its next chief risk officer

Derek Flowers, a nearly 30-year veteran, is set to retire in mid-January, handing the reins to the executive who helped lead the bank's regulatory turnaround.

Ameriprise runs advisor ads on ESPN, Golf Channel, CBS
Ameriprise runs advisor ads on ESPN, Golf Channel, CBS

The campaign spans broadcast TV and streaming, as the brokerage faces slowing client net flows and an $8.1 billion advisor team that left to launch an RIA this month.

SPONSORED In the Age of AI, Trust Becomes the Advisor's Greatest Asset

As AI makes financial information more accessible than ever, Lana Hock explains why human judgment, trust, and empathy remain the qualities clients value most in a financial advisor

SPONSORED Direct indexing webinar targets tax-loss harvesting amid market swings

Northern Trust’s Ken Lassner shows advisors how to convert volatility into after-tax portfolio gains