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(Revised from original 2011 version)
AQR's DELTA Strategy
In the summer of 2008, AQR Capital Management was considering the launch of a new hedge fund strategy. The proposed DELTA portfolio would offer investors exposure to a basket of nine major hedge fund strategies. The DELTA strategy would be innovative in two ways. First, in terms of its structure, AQR would implement these underlying strategies using a well-defined investment process, with the goal being to deliver exposure to a well-diversified portfolio of hedge fund strategies. Second, it terms of its fees, the new DELTA strategy would charge investors relatively lower fees: 1% management fees plus 10% of performance over a cash hurdle (or, alternatively, a management fee of 2% only). This fee structure was low relative to the industry, where 2% management fees plus 20% of performance, often with no hurdle, was standard.
Keywords: Investment Portfolio;
Financial Services Industry;
Bergstresser, Daniel, Lauren Cohen, Randolph Cohen, and Christopher Malloy. "AQR's DELTA Strategy." Harvard Business School Case 212-038, March 2012. (Revised from original October 2011 version.)