Case | HBS Case Collection | September 2010 (Revised March 2012)

AQR's Momentum Funds (A)

by Daniel Baird Bergstresser, Lauren H. Cohen, Randolph Cohen and Christopher J. Malloy

Abstract

AQR is a hedge fund based in Greenwich, Connecticut, that is considering offering a wholly new line of product to retail investors, namely the ability to invest in the price phenomenon known as momentum. There is a large body of empirical evidence supporting momentum across many different asset classes and countries. However, up until this point, momentum was a strategy employed nearly exclusively by hedge funds, and thus not an available investment strategy to most individual investors. This case highlights the difficulties in implementing this “mutual fund-itizing” of a hedge fund product, along with the challenges that the open-end and regulatory features that a mutual fund poses to many successful strategies implemented in other contexts. In addition, it gives students the ability to calculate and interpret various horizons of correlations between many popular investment strategies using long time-series data and then thinking about the potential complementarities of strategies from a portfolio construction context.

Keywords: Financial Strategy; Investment Funds; Investment Portfolio; Governing Rules, Regulations, and Reforms; Product Development; Financial Services Industry; Greenwich;

Citation:

Bergstresser, Daniel Baird, Lauren H. Cohen, Randolph Cohen, and Christopher J. Malloy. "AQR's Momentum Funds (A)." Harvard Business School Case 211-025, September 2010. (Revised March 2012.)