AQR's Cliff Asness: Why Most Investors Quit Before Winning

Why do most investors quit right before winning—and what separates the few who don’t?

Cliff Asness is one of the most influential minds in quantitative investing and the Founder, Managing Principal and Chief Investment Officer at AQR Capital Management, which oversees over $100 billion in assets. In this wide-ranging conversation, we go deep into what makes a successful long-term strategy, how Cliff thinks about building portfolios, and why most investors misjudge both volatility and leverage. He also shares what it was like launching AQR after his early work on momentum strategies at Goldman Sachs, and what he’s learned about investor behavior across cycles.

This is one of the most insightful and entertaining conversations we’ve had on the podcast—and Cliff brings both humor and hard-earned wisdom to the table.

Highlights:
Why most investors are under-levered—and how Cliff thinks about smart leverage
The origins of AQR’s first strategies and his early momentum research
The problem with how investors benchmark hedge funds
Why high volatility strategies can actually reduce risk
The truth about hedge fund alpha—and why most funds are just “half-hedged”
The “pull the goalie” metaphor and taking rational risks under pressure
What AQR does (and doesn’t) believe in when it comes to machine learning
Cliff’s view on how to build portfolios that survive 3-year drawdowns
Why he thinks the best portfolios often don’t look great in the short run

Guest Bio:
Cliff Asness is the founder, Managing Principal, and Chief Investment Officer at AQR Capital Management. He holds a PhD from the University of Chicago, where he studied under Eugene Fama and Kenneth French. Cliff is widely recognized for his groundbreaking work on momentum investing and factor-based strategies, and he’s one of the most cited voices in modern quantitative finance. He has published extensively in academic journals and is known for his bold, sometimes contrarian takes on investing and market behavior.

Our Podcast now receives more than 300,000 downloads a month. Are you interested in sponsoring an episode? Please email David Weisburd at [email protected].

We’d like to thank @JuniperSquare for sponsoring this episode!

Sponsor:
Juniper Square is dedicated to transforming the private markets investing experience. The company provides a full range of modern, connected fund technologies and services for over 2,100 private markets GPs across fundraising, reporting, fund administration, treasury, compliance, and business intelligence. Today, over $1 trillion of assets and 600,000+ LP accounts are managed through Juniper Square software and fund administration services. Learn more at www.junipersquare.com/vc.

Stay Connected:
Twitter:
David Weisburd: @dweisburd

LinkedIn:
David Weisburd: linkedin.com/in/dweisburd/
Cliff Asness:   / cliff-asness  

Links
AQR: https://www.aqr.com/About-Us/OurFirm#...

Questions or topics you want us to discuss on How I Invest? Email us at [email protected].

Timestamps:
(0:00) Episode preview
(0:45) Changes in the small cap index and implications for private equity
(3:07) Quality and balance of public small cap companies in the new economic environment
(7:15) The virtue of illiquidity in investments and issues with LP consultants
(9:20) Asset allocation and finding quality in the small cap space
(16:32) Thesis on investing in Europe and executing contrarian bets
(20:26) Building conviction and the benefits of discretionary investment management
(22:54) Role of corporate governance and client-manager relationships
(25:45) Leeway for general partners and the European investment landscape
(28:00) Navigating tariffs, strategic communication, and risk management
(34:43) Bullish perspective on big private equity funds and talent retention challenges
(41:06) Effective generational planning and diversifying a private equity portfolio
(44:24) Preference for spinouts, their advantages, and fund scalability
(52:09) Personal vs. client investment strategies and received wisdom in asset allocation
(57:26) Evolutionary psychology and herd behavior in finance
(58:33) Closing remarks

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