Why I like certain alternative investments

[Semi-Retyrd]

Thanks for providing such a clear explanation of why alt investments usually have high expense ratios, and doing so without the smugness that I often see in these types of forums.

As a child I was brought up on Dragnet. Detective Joe Friday made a big impression on me with "just the facts ma'am" ... which it turns out he never said exactly (per Google's AI).

 

[FD1000]

The more investors believe alternative funds have excessively high expense ratios, the more likely they are to stay away. In some ways, that's a good thing.

As assets under management (AUM) grow, it often becomes more difficult for managers to maintain the same level of flexibility, agility, and momentum that helped generate strong results in the first place.

Smaller funds can often move more quickly, take advantage of niche opportunities, and adjust positions without significantly affecting the market. As a fund becomes larger, those advantages can diminish.

BTW, QLENX AUM=8.2 billion...QNZNX=392 million. Keep talking about QNZNX and if AUM grows to several billions, it may start to lag.

For that reason, I don't rush to post and analyze my funds.

 

[Diogenes]

Cliff is a very astute fellow and a gifted writer/speaker. I enjoy his commentary, even when we disagree.

My alts were up nicely today as well but not enough to get me anywhere near a gain!

Nicely done. But I'd aver, that what really matters is the long-term moving average (say, a 5 year window). Cliff Asness in the above-cited video himself talks about most investors getting impatient about after 2-2.5 years. If a strategy is substantially underperforming over such a period, they bail. Are they wrong?

... I know enough to know that I don't know what I don't know, but also like to learn and find out....

There is a tendency to get all agog over this or that new discovery, as it appears to be attractive, having a low Sharpe ratio or whatnot. This happens when one has enough experience to go beyond the dear-in-headlights phase, and is actively looking for alternatives... but hasn't yet been burned enough to become thoroughly skeptical.

"I'm curious (Y'all are out of my league, TBH) but do you consider expense ratios at all when choosing funds like this? - I.E. what's the thought process you go through to pick one over another similar return?"

Not claiming to be an expert, but I sincerely believe in the Efficient Markets hypothesis, which suggests skepticism of any actively managed fund. Besides expense ratios, the advantage of indices is low turnover, which is important for reducing the annual tax bill.

... If a fund uses leverage (ie borrowing money to buy extra stock) the interest on this borrowing must be added to the expense ratio. ...

Yes of course, we have to be careful about terminology. Some expenses are incurred in the course of trading, and these get passed on to the retail investor. Other expenses - what we colloquially think of as "expenses" - are specifically management fees.

 

[COcheesehead]

There is a tendency to get all agog over this or that new discovery, as it appears to be attractive, having a low Sharpe ratio or whatnot.

*cough* you want a high Sharpe ratio *cough*

 

[Diogenes]

*cough* you want a high Sharpe ratio *cough*

Yes, typo. Or am I also going to be sent into the dungeon of incompetent investors? Hopefully my landlord will be kind enough to delivery my annual Christmas goose there....

 

[Anovice]

The more investors believe alternative funds have excessively high expense ratios, the more likely they are to stay away. In some ways, that's a good thing.

As assets under management (AUM) grow, it often becomes more difficult for managers to maintain the same level of flexibility, agility, and momentum that helped generate strong results in the first place.

Smaller funds can often move more quickly, take advantage of niche opportunities, and adjust positions without significantly affecting the market. As a fund becomes larger, those advantages can diminish.

BTW, QLENX AUM=8.2 billion...QNZNX=392 million. Keep talking about QNZNX and if AUM grows to several billions, it may start to lag.

For that reason, I don't rush to post and analyze my funds.

Do you think a post about you buying QNZNX, for example, will convince forum members to buy it and drive the fund's AUM from 392 million to 8.2 billion?

 

[COcheesehead]

Adding skepticism into the equation is good. It’s helps you explore further, but the empirical data provided by the financial industry is there for us to use as a tool to evaluate investments rather than using our emotions, feelings, etc. Think of them as a batting average or a quarterback rating. They can’t predict the future, but they at least let you know if you have a prime player or a bench warmer. Ignore and make fun of at your own peril.

 

[COcheesehead]

Do you think a post about you buying QNZNX, for example, will convince forum members to buy it and drive the fund's AUM from 392 million to 8.2 billion?

QLENX went from a wildly successful fund to a dud in a year. A lot of people on here bought it when it became a darling of the board. It was then too late. It wasn’t just here either, I read about it in many places. The fund is now closing, having been over loved.

 

[lawman]

QLENX went from a wildly successful fund to a dud in a year. A lot of people on here bought it when it became a darling of the board. It was then too late. It wasn’t just here either, I read about it in many places. The fund is now closing, having been over loved.

I have a lot of QLENX..I'd like to know who here rates it as buy, hold, or sell and why? I'm strongly considering selling..

 

[COcheesehead]

I have a lot of QLENX..I'd like to know who here rates it as buy, hold, or sell and why? I'm strongly considering selling..

Here are my AQR funds. The gold line is QLENX. See the divergence early in the year where QLENX flat lines? That’s were I sold mine. For me, it’s just underperformance vs their other options.

 

[lawman]

Here are my AQR funds. The gold line is QLENX. See the divergence early in the year where QLENX flat lines? That’s were I sold mine. For me, it’s just underperformance vs their other options.

View attachment 64160

Seems to me that when I make choices based on recent past performance I end up wrong...My exception to that strategy has been CLSE...I'm considering swapping QLENX for more CLSE but I just fear that if I do that now CLSE will go the other way.

 

[COcheesehead]

Seems to me that when I make choices based on recent past performance I end up wrong...My exception to that strategy has been CLSE...I'm considering swapping QLENX for more CLSE but I just fear that if I do that now CLSE will go the other way.

Create a watchlist or start a tiny investment and watch how it performs. Does it underperform, out perform? CLSE has a larger standard deviation so it could perform better on the upside, but also will drop more on the downside. Invest based on your goals. What are you trying to achieve. That always helps me with my decisions. If an investment meets my goals, I am satisfied.

 

[lawman]

Create a watchlist or start a tiny investment and watch how it performs. Does it underperform, out perform? CLSE has a larger standard deviation so it could perform better on the upside, but also will drop more on the downside. Invest based on your goals. What are you trying to achieve. That always helps me with my decisions. If an investment meets my goals, I am satisfied.

My goals and time horizons have changed..I now have a Trust and would like to create something that would benefit many generations to come..I may never take anything from my portfolio..At some point I can see going into 100% index equity funds..Still I'm not ready to do that yet. I'm having too much fun being active with my investments..

 

[trukfixer]

Create a watchlist or start a tiny investment and watch how it performs.

Thats what I do with a lot of my "maybe" list - Yahoo Finance portfolios can let you do that with "fake money" , as can a website called Wallstreetsurvivor.com which I also use (Been testing my "growth" picks there vs my "income" picks on Yahoo Finance - so far either one has been running neck and neck for a while... for my picks at least... but sites like that (I think Market Watch has a similar platform "trading game" thing) can help , I think.

 

[FD1000]

I have a lot of QLENX..I'd like to know who here rates it as buy, hold, or sell and why? I'm strongly considering selling..

I rated it a sell in Feb in line with what I have done for decades based on a simple chart.
When you have similar choices, and I consider all AQR as one, you switch to a better-performing fund. I like the SD to be close too.
I don't need to look for an excuse or explanation when it doesn't work.

YTD tells the story.

3 years tell you that QNZNX is a great sub.
NEVER FIGHT THE MARKETS, ALWAYS JOIN THEM; THEY KNOW BEST.

 

[Semi-Retyrd]

I have a lot of QLENX..I'd like to know who here rates it as buy, hold, or sell and why? I'm strongly considering selling..

I had a large position in QLENX at the end of last year. I started selling out of it in February and got out completely a couple of months later. Why? Partly because of underperformance. Partly because I found what I consider a better replacement in QRPNX and finally because of the announcement by AQR that they are closing the fund which says to me they think it has grown too large to implement its strategy properly.

I still think the QLENX strategy is fundamentally a good one. However, it has lost it nimbleness with increasing size and the signals its AI uses to buy and sell have been messed up by the war with Iran IMO.

 

[lawman]

Here are my AQR funds. The gold line is QLENX. See the divergence early in the year where QLENX flat lines? That’s were I sold mine. For me, it’s just underperformance vs their other options.

View attachment 64160

You might want to sell your QNZNX..I just placed an order to sell half my QLENX and buy QNZNX..

 

[Diogenes]

Seems to me that when I make choices based on recent past performance I end up wrong...

Thus the adage, "Past performance is no guarantee of future returns". This becomes more accurate, the narrower the investment. It's not all that accurate for a total world equity index fund (by market cap). Indeed, the whole premise behind "buy and hold" is that for a very broad index fund, the future will more or less resemble the past, forever. But for narrow funds, for actively managed funds, or for individual stocks, the adage should very much be taken to heart.

I wish that Cliff would do one of his detailed long-form exposes on the various AQR funds, the difference between them, the rationale for why one might outperform and another lag. He is likely loath to do that, because he doesn't like to mix his business with his commentary as a public intellectual, and we can't blame him. Still, it would be nice to get a candid window into that brain of his.

 

[COcheesehead]

You might want to sell your QNZNX..I just placed an order to sell half my QLENX and buy QNZNX..

Hey, FYI, you can do same day exchanges between AQR funds as well. No need to sell, then buy.

 

[junkanoo]

Hey, FYI, you can do same day exchanges between AQR funds as well. No need to sell, then buy.

Is that only for N-Class shares or can you also do that with I-Class shares?

 

[FD1000]

To get to I share you must have the min first.

 

[FD1000]

Thus the adage, "Past performance is no guarantee of future returns". This becomes more accurate, the narrower the investment. It's not all that accurate for a total world equity index fund (by market cap). Indeed, the whole premise behind "buy and hold" is that for a very broad index fund, the future will more or less resemble the past, forever. But for narrow funds, for actively managed funds, or for individual stocks, the adage should very much be taken to heart.

I wish that Cliff would do one of his detailed long-form exposes on the various AQR funds, the difference between them, the rationale for why one might outperform and another lag. He is likely loath to do that, because he doesn't like to mix his business with his commentary as a public intellectual, and we can't blame him. Still, it would be nice to get a candid window into that brain of his.

I have been doing this for over 25 years.
1995-2000 + 2010-2025 = LC tilting growth
2000-10 = value, SC, international

ALT didn't work for many years because I have tested it. But, since several years ago the Algorithm of AQR started working better. Maybe AI is the reason.
As usual, I don't need explanation, markets are always right. This little nugget is difficult for most to accept.

 

[COcheesehead]

I have been doing this for over 25 years.
1995-2000 + 2010-2025 = LC tilting growth
2000-10 = value, SC, international

ALT didn't work for many years because I have tested it. But, since several years ago the Algorithm of AQR started working better. Maybe AI is the reason.
As usual, I don't need explanation, markets are always right. This little nugget is difficult for most to accept.

Agree. The market always tells.

 

[junkanoo]

Hey, FYI, you can do same day exchanges between AQR funds as well. No need to sell, then buy.

Is that only for N-Class shares or can you also do that with I-Class shares?

To get to I share you must have the min first.

Understood. Some of us on this forum have I-Class shares. In my case, it was before QLEIX required a $5M minimum.

The question remains for those knowledgeable about same-day exchanges ... is that only for N-Class shares or can you do that with I-Class shares as well?

 

[FD1000]

Understood. Some of us on this forum have I-Class shares. In my case, it was before QLEIX required a $5M minimum.

The question remains for those knowledgeable about same-day exchanges ... is that only for N-Class shares or can you do that with I-Class shares as well?

Exchanges usually can be done for the same share type.
You can go from I to I.