05/27/2009

Asness Eyes $750 Million for Credit Fund

Following a difficult year that saw its flagship fund plummet 40%, AQR has begun marketing a special-opportunities fund it launched last year with its own capital.

The firm's co-founder, quantitative specialist Cliff Asness, pitched the fund to investors at a recent capital-introduction event in New York sponsored by Goldman Sachs. AQR Diversified Opportunities fund, set up with $40 million of the firm's own money, takes an event-driven approach to investing in convertible bonds, special-purpose-acquisition vehicles and merger arbitrage.

The Greenwich, Conn., fund manager is looking to solicit up to $750 million of equity, though it's unclear how much the firm can expect to raise in the current environment.

Despite the fund-raising challenges, AQR is expected to begin marketing another vehicle in the coming weeks. Details were unavailable, but the equity goal is roughly $125 million.

The 10-year-old firm runs $20 billion - mostly through long-only vehicles, including separate accounts. It also manages hedge funds with $6 billion to $7 billion of assets.

Last year, AQR's hedge funds posted mixed results, ranging from a 4% gain to a 40% loss for the firm's flagship, Global Alpha. In the face of sharp losses and heavy redemptions for some of its funds, AQR cut its staff last fall, laying off 15 people, or about 7% of its staff. They were the first layoffs in the firm's history.

But the difficulties haven't stopped the firm from cranking out new investment products in an ongoing effort to diversify its business. Earlier this year, AQR unveiled a suite of mutual funds for retail investors. Meanwhile, some of its hedge funds have begun to rebound. Global Alpha is up 18% this year through May 20.

Asness, who founded the firm with David Kabiller and other partners, is known for his feisty style. Earlier this month, he made headlines when he took umbrage at President Obama's criticism of the role hedge funds played in Chrysler's bankruptcy. In an open letter titled "Unafraid in Greenwich, Connecticut," Asness wrote: "This is America. We have a free enterprise system that has worked spectacularly for us for 200-plus years. When it fails, it fixes itself. Most importantly, it is not a lackey of the Oval Office, to be scolded for disobedience by the president."

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