Combining Equities and Long/Short Alternative Investing
What is Fusion?
“Fusion” blends full traditional equity exposure with long/short alternative strategies—within a single, capital-efficient investment vehicle. This hybrid investment approach allows investors to stay invested in core equities while adding uncorrelated return streams through long/short alternatives. The result? Enhanced diversification and potential for improved risk-adjusted and total returns.
Why Fusion?
Institutional investors have long used alternative investments, including long/short strategies, to diversify portfolios and manage risk—without abandoning traditional stock and bond allocations. Until recently, complexity and access limited these strategies to large institutions. Now, Fusion investing democratizes this approach, making it available to financial advisors, small institutions, and individual investors.
Opportunity to Enhance Return Outcomes
Achieving higher returns through long-only equity strategies is increasingly difficult due to market concentration and macroeconomic headwinds. By relaxing the long-only constraint, Fusion introduces actively managed long/short positions—allowing managers to pursue returns from both rising and falling securities. These additional return streams create the opportunity for outperformance beyond traditional equity markets.
Diversify Without Sacrificing Equity Exposure
In uncertain economic environments, portfolio diversification through long/short alternative investments may be crucial. Yet many investors hesitate to reduce equity allocations to make room for alternatives.
Assuming a 60/40 stock/bond benchmark, investors previously would have needed to sacrifice traditional exposure to allocate to alternatives. This so-called “funding problem” can lead to a performance drag in periods where alternatives underperform stocks and bonds. Fusion solves this by integrating long/short strategies without underweighting equities—maintaining full equity exposure while adding uncorrelated returns in a single, efficient solution.
Illustrative Strategy Solution to the Funding Problem
Source: AQR. For illustrative purposes only.
Ability to Improve Capital Efficiency
Allocating to traditional alternatives can reduce portfolio risk, but often at the cost of lower total returns. “Capital efficiency” refers to the return generated per dollar invested. By fusing equity returns with alternative investing strategies, investors gain exposure to both asset classes without committing extra capital or sacrificing return potential.
Make Fusion Your Core Equity Allocation
Fusion isn’t just an add-on; it can serve as a modern core equity allocation. By embedding long/short alternative investments within your equity sleeve, Fusion offers greater diversification, potential outperformance, and downside mitigation. In volatile markets, this integrated approach can reduce drawdowns and support long-term performance.
Related Funds
DISCLOSURES
Investors should carefully consider the investment objectives, risks, charges and expenses of the Funds before investing. To obtain a prospectus or summary prospectus containing this and other important information, please call 1-866-290-2688 or click here to view or download a prospectus online. Read the prospectus carefully before you invest.
The information contained on this website has been provided solely for information purposes and does not constitute an offer or solicitation of an offer, or any advice or recommendation, to purchase any securities or other financial instruments, and may not be construed as such. The information on this site is directed only at persons or entities in any jurisdiction or country where such access to information contained on this website and use of such information is not contrary to local law or regulation. Accordingly, all persons who access this website are required to inform themselves of and to comply with any such restrictions. Past performance is not a guarantee of future performance.
There can be no assurance that an investment strategy will be successful. Historic market trends are not reliable indicators of actual future market behavior or future performance of any particular investment which may differ materially and should not be relied upon as such.
View definitions of benchmarks and other terms used here.
The investment strategy and themes discussed herein may not be in the best interest of investors depending on their specific investment objectives and financial situation.
Diversification does not eliminate the risk of experiencing investment losses. There is a risk of substantial loss associated with trading commodities, futures, options, derivatives and other financial instruments. Before trading, investors should carefully consider their financial position and risk tolerance to determine if the proposed trading style is appropriate. Investors should realize that when trading futures, commodities, options, derivatives and other financial instruments one could lose the full balance of their account. It is also possible to lose more than the initial deposit when trading derivatives or using leverage. All funds committed to such a trading strategy should be purely risk capital.
© AQR Funds are distributed by ALPS Distributors, Inc. AQR Capital Management, LLC is the Investment Manager of the Funds and a federally registered investment adviser. ALPS Distributors is not affiliated with AQR Capital Management.