Cliff Asness – The Past, The Present & Future of Quant [Invest Like the Best, EP.111]

My guest this week is Cliff Asness, the managing and founding principal at AQR Capital Management. 20 years after its founding in 1998, AQR manages $226 Billion dollars across a number of quantitatively based investing strategies.

Cliff was an original quant researcher and he has long been one of the financial writers and thinkers that I look to for education and for inspiration.

I distinctly remember reading one paper in particular—value and momentum everywhere—somewhat early in my career and thinking: this is the kind of research I want to do forever.

You can always tell when talking to Cliff or hearing him speak that he just loves researching markets. There is a deep intellectual honesty in his work, and a respect for thinkers at different ends of the market spectrum, from Gene Fama and Ken French, to Jack Bogle, to Dick Thaler and Robert Shiller.

Our conversation is about all things quant—past, present, and future. Cliff touches on many of the big issues facing quant investing and tells some great strong along the way. I hope you enjoy our discussion. Let’s dive in.

Show Notes

1:47 – (First Question) – Favorite superhero

2:43 – Why ‘Ka nama kaa lajerama’ is part of his twitter profile.

3:38 – How portfolios have shifted the way they use factors in a portfolio

10:15 – What are good questions clients are asking right now

13:24 – Contrarian Factor Timing Is Deceptively Difficult

15:40 – Does technology impact investing strategy

22:14 – When to share information vs keep it proprietary for clients sake

26:40 – How their research process is governed

31:14 – How they will incorporate machine learning into their process

34:21 – What they will do when red flags show up

37:01 – Wackiest question from a client

41:47 – The Three Sharpe Ratio Strategy

41:53 – Liquid Alt Ragnarök

48:10 – Does his thinking change when it comes to asset allocation vs portfolio building

50:17 – Parallels Between the Cross-Sectional Predictability of Stock and Country Returns

53:01 – Sin a Little

57:14 – Trends in fees and pricing

1:02:43 – Thoughts on private equity markets

1:11:03 – Common attributes of really good researchers

1:13:21 – What is he most curious about right now

1:15:43 – What excites him outside of finance

1:17:00 – How much he discusses his work with his kids

1:18:35 – The Devil in HML’s details

1:19:36 – Kindest thing anyone has done for him