AQR Diversified Arbitrage Fund
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- daily nav $10.32
- change $0.05
- daily return 0.49%
- inception date 1/16/2009
- AUM $653MM
Investment Objective
A Diversified Approach to Arbitrage Opportunities
The Fund seeks to exploit mispricings in markets through a diversified investment approach across merger arbitrage, convertible arbitrage and a suite of event-driven strategies.
Investment Approach
Arbitrage strategies look for two related assets that are trading at different prices, then buy the cheaper one and sell short the more expensive one. The difference between the prices is the expected profit of the trade. AQR's Diversified Arbitrage Fund invests in three primary arbitrage strategies:
• Merger Arbitrage — consists of buying shares of the target company in a proposed merger, and hedging the exposure to the acquirer by shorting the stock of the acquiring company
• Convertible Arbitrage — consists of buying convertible securities and attempting to mitigate the risks associated with the investment by shorting the stock of the issuer
• Event-Driven Investments — involves various corporate actions where very similar assets begin to trade at different prices (e.g., the different share classes of a public company's stock)
Over time, the Fund seeks to balance its exposure equally among the three strategies while maintaining the ability to make tactical tilts based on each strategy's conditional attractiveness.
Why Invest in the AQR Diversified Arbitrage Fund?
Seeks Attractive Risk-Adjusted Returns
The Fund seeks to provide a steady and independent source of returns to a portfolio of stocks and bonds, aiming to maintain strong performance over the long term.
Potential to Perform in Up and Down Markets
Portfolio Diversification
Strategy Exposures
As of June 30, 2020
| Long Positions as % of Net Assets | Short Positions as % of Net Assets | |
|---|---|---|
| Convertible Arbitrage | 87.96% | -63.25% |
| Event Driven | 36.94% | -11.19% |
| Merger Arbitrage | 28.49% | -10.08% |
| Total | 153.39% | -84.52% |
Sector Exposures
As of June 30, 2020
| % of Long Exposure | |
|---|---|
| Communication Services | 6.68% |
| Consumer Discretionary | 13.13% |
| Consumer Staples | 0.41% |
| Energy | 1.16% |
| Financials | 7.87% |
| Health Care | 16.30% |
| Industrials | 6.79% |
| Information Technology | 19.37% |
| Materials | 1.99% |
| Miscellaneous | 21.49% |
| Real Estate | 1.37% |
| Utilities | 3.45% |
| Total | 100.00% |
Security Types
As of June 30, 2020
| % of Long Exposure | |
|---|---|
| Convertible Bonds | 61.40% |
| Individual Stocks | 31.35% |
| Close-end Funds | 5.50% |
| Debt | 1.75% |
| Total | 100.00% |
Top 5 Long Holdings
As of June 30, 2020
| NOVELLUS SYSTEMS INC LRCX 2.625 05/15/41 CVT | 4.82% |
|---|---|
| TESLA INC TSLA 2.000 05/15/24 CVT 0.0025 12/9999 Bullet Swap | 4.73% |
| CARNIVAL CORP CCLX 5.750 04/01/23 CVT 0.0025 04/2025 Bullet Swap | 2.82% |
| INOVIO PHARMACEUTICALS INC INO 6.500 03/01/24 CVT | 2.04% |
| SQUARE INC SQURE 0.125 03/01/25 CVT 0.0025 04/2025 Bullet Swap | 1.54% |
Top 5 Short Holdings
As of June 30, 2020
| E-Mini S&P 500 Index Future | -6.24% |
|---|---|
| U.S. 5 Yr Treasury Note Futures | -5.09% |
| Lam Research | -4.83% |
| Tesla | -4.46% |
| CDX.NA.HY | -4.40% |
Portfolio Statistics
As of June 30, 2020
| # of long holdings | 267 |
|---|---|
| # of short holdings | 167 |
Annualized Total Returns
As of August 31, 2020
| MTD | YTD | 1YR | 3YR | 5YR | 10YR | Since Inception 1/16/2009 | Gross Expense Ratio | Net Expense Ratio* | |
|---|---|---|---|---|---|---|---|---|---|
| AQR Diversified Arbitrage Fund | 2.47% | 7.32% | 9.80% | 6.65% | 5.75% | 2.98% | 3.56% | 2.05% | 1.97% |
| ICE BofAML US 3M T-Bill | 0.01% | 0.62% | 1.27% | 1.72% | 1.20% | 0.64% | 0.57% |
| AQR Diversified Arbitrage Fund | ICE BofAML US 3M T-Bill | |
|---|---|---|
| MTD | 2.47% | 0.01% |
| YTD | 7.32% | 0.62% |
| 1YR | 9.80% | 1.27% |
| 3YR | 6.65% | 1.72% |
| 5YR | 5.75% | 1.20% |
| 10YR | 2.98% | 0.64% |
| Since Inception 1/16/2009 | 3.56% | 0.57% |
| Gross Expense Ratio | 2.05% | |
| Net Expense Ratio* | 1.97% |
As of June 30, 2020
| QTD | YTD | 1YR | 3YR | 5YR | 10YR | Since Inception 1/16/2009 | Gross Expense Ratio | Net Expense Ratio* | |
|---|---|---|---|---|---|---|---|---|---|
| AQR Diversified Arbitrage Fund | 9.80% | 2.48% | 5.52% | 4.91% | 4.41% | 2.66% | 3.20% | 2.05% | 1.97% |
| ICE BofAML US 3M T-Bill | 0.02% | 0.60% | 1.64% | 1.77% | 1.19% | 0.64% | 0.58% |
| AQR Diversified Arbitrage Fund | ICE BofAML US 3M T-Bill | |
|---|---|---|
| QTD | 9.80% | 0.02% |
| YTD | 2.48% | 0.60% |
| 1YR | 5.52% | 1.64% |
| 3YR | 4.91% | 1.77% |
| 5YR | 4.41% | 1.19% |
| 10YR | 2.66% | 0.64% |
| Since Inception 1/16/2009 | 3.20% | 0.58% |
| Gross Expense Ratio | 2.05% | |
| Net Expense Ratio* | 1.97% |
Ronen Israel
Principal
- 24 years of experience
- 21 years at AQR
M.A., Columbia University
B.S., B.A.S., University of Pennsylvania
Lars N. Nielsen
Principal
- 20 years of experience
- 20 years at AQR
M.S., B.S., University of Copenhagen
Rocky Bryant
Principal, CNH Partners
- 19 years of experience
- 18 years at AQR
B.S., Massachusetts Institute of Technology
Mark L. Mitchell
Principal, CNH Partners
- 32 years of experience
- 19 years at AQR
Ph.D., M.A., Clemson University
B.B.A., University of Louisiana at Monroe
Todd C. Pulvino
Principal, CNH Partners
- 22 years of experience
- 19 years at AQR
Ph.D., A.M., Harvard University
M.S., California Institute of Technology
B.Sc, University of Wisconsin-Madison
Investment Minimums
| Individual Investors | Not Available |
|---|---|
| Institutional Investors | $100,000 |
| Accounts Offered by Financial Advisors | $50 million or a total of $100 million combined per advisor across all Funds |
Shareholder Fees
| Sales Load | None |
|---|---|
| Deferred Sales Load | None |
| Redemption Fees | None |
Annual Fund Operating Expenses
| Management Fee | 1.00% |
|---|---|
| Distribution (12b-1) Fee | None |
| Other Expenses | |
| Dividends On Short Sales and/or Interest Expense | 0.78% |
| All Other Expenses | 0.18% |
| Acquired Fund Fees | 0.09% |
| Gross Expenses | 2.05% |
| Less: Fee Waivers and/or Expense Reimbursements | 0.08% |
| Net Expenses* | 1.97% |
| Adjusted Expense Ratio** | 1.19% |
|---|
An investment in any of the AQR Funds involves risk, including loss of principal. The value of the Funds’ portfolio holdings may fluctuate in response to events specific to the companies in which the Fund invests, as well as economic, political or social events in the United States or abroad. Please refer to the prospectus for complete information regarding all risks associated with the Funds. An investor considering the Funds should be able to tolerate potentially wide price fluctuations. The Funds are subject to high portfolio turnover risk as a result of frequent trading, and thus, will incur a higher level of brokerage fees and commissions, and cause a higher level of tax liability to shareholders in the Funds. The Funds may attempt to increase its income or total return through the use of securities lending, and they may be subject to the possibility of additional loss as a result of this investment technique.
Information about how each Fund voted proxies relating to portfolio securities held during the most recent 12-month period ended June 30 will be available no later than August 31. Please click here to view the most recent Form N-PX for the AQR Funds.
PRINCIPAL RISKS:
An investment in the Fund involves risk, including loss of principal. The Fund is not suitable for all investors.
The Fund has the risk that the anticipated arbitrage opportunities do not play out as planned, resulting in potentially reduced returns or losses to the Fund as it unwinds its trades. The use of derivative instruments exposes the Fund to additional risks and transaction costs. The Fund enters into a short sale by selling a security it has borrowed. If the market price of a security increases after the Fund borrows the security, the Fund will suffer a potentially unlimited loss when it replaces the borrowed security at the higher price. Short sales also involve transaction and other costs that will reduce potential Fund gains and increase potential Fund
losses.
Please refer to the Prospectus for complete information regarding all risks associated with the Fund. Risk Allocation and attribution are based on estimated data, and may be subject to change.
Definitions:
Volatility: a statistical measure of the dispersion of returns for a given security or index.
Beta: A measure of systematic risk of a portfolio
Sharpe Ratio: a ratio which measures risk-adjusted performance
Investors should carefully consider the investment objectives, risks, charges and expenses of the Funds before investing. To obtain a 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.
Performance data quoted represent past performance. Past performance does not guarantee future results and current performance may be lower or higher than the data quoted. All returns shown are total returns that assume reinvestment of dividends and capital gains. Returns for periods under a year are cumulative, all others are average annual returns. Investment returns and principal will fluctuate with market and economic conditions and you may have a gain or loss when you sell shares. From time to time the Fund’s advisor may waive fees or reimbursed expenses, without which performance would have been lower. Please call 866-290-2688 for most recent month-end performance.
Performance shown prior to a share class’s inception date reflects the historical performance of the Fund’s Class I shares, calculated using the fees and expenses of the Class N or Class R6 shares, respectively.
DISCLOSURES
Stocks and bonds are subject to risks, including the possible loss of principal. International stocks that provide exposure to foreign markets involve special risks, such as currency fluctuations, differing financial reporting and regulatory standards, and economic and political instability. These risks are highlighted when stocks are from emerging markets. Stocks of small-cap companies are generally more volatile and not as readily marketable as those of larger companies. Government bonds and Treasury bills are subject to interest rate risk, but they are backed by the full faith and credit of the U.S. government if held to maturity. The repayment of principal and interest of a corporate bond are guaranteed by the issuing company, and subject to default and credit risks. Indices are unmanaged and not available for direct investment. Please discuss with your financial professional or agent the benefits and risks of these securities.
Index Methodology
The AQR DynamiQ Allocation IndexS℠ (the “Index”) is a long only index providing exposure to futures on third-party equity indices primarily comprised of large-cap securities of U.S. and non-U.S. issuers from developed markets, and exposure to futures on U.S. and non-U.S. developed government fixed income securities. The Index will target an average of 40% equity and 60% fixed income weighting over the long-term. The exposures of the Index to equity and fixed income will vary based on a rules-based methodology that allocates to equity and fixed income based on several well-known investment styles, with the potential for substantially different weightings from the 40/60 target depending on both market conditions and the attractiveness of each asset according to signals within the Index methodology.
AQR DynamiQ Allocation Index is available within select index annuities issued by American General Life Insurance (AGL), Houston, TX. AGL does not issue product in New York. Please see product brochure for more information.
Withdrawals may be subject to federal and/or state income taxes. An additional 10% federal tax may apply if you make withdrawals or surrender your annuity before age 59½. Consult your tax advisor regarding your specific situation.
Interest earned in an index annuity is calculated using index performance over a specific term, subject to contract provisions, such as an index rate cap, spread or participation rate, which may limit or reduce the upside potential. The index rate cap is the maximum percentage of index performance that can be credited as interest for an index term. The spread is the minimum threshold or percentage that index performance must exceed to be credited interest. The participation rate is the percentage of index performance that is used to calculate interest in certain accounts.
“AQR” and the AQR DynamiQ Allocation Index are trademarks or service marks of AQR Capital Management, LLC or one of its affiliates (“AQR”) and have been licensed for use by American General Life Insurance Company (the “Company”) for use as a benchmark for an annuity (inclusive of all applicable riders, the “Product”). The Product is not sponsored, endorsed, sold or promoted by AQR, its affiliates, nor the calculation agent, and they do not provide any investment advice to the Company with respect to the Product or to owners of the Product, nor do they make any representation regarding the advisability of investing in the Product or obtaining exposure to the Index. The Index is constructed without regard to the investment needs or suitability of the Company, the Product, or any Product owners. AQR and the Index’s calculation agent have no obligation or liability whatsoever with respect to, and make no representations regarding, the Product. AQR makes no representation regarding the ability of the Index to achieve its goals and disclaims all express or implied warranties, including any warranty of merchantability and fitness for a particular purpose or use, in connection with the Index, including, without limitation, any results to be obtained by tracking the Index. Neither AQR nor the Index’s Calculation Agent guarantees the accuracy or completeness of the Index. NONE OF AQR OR ITS AFFILIATES SHALL HAVE ANY LIABILITY FOR ANY ERRORS, OMISSION OR INTERRUPTIONS OF OR IN CONNECTION WITH THE INDEX OR ANY DATA INCLUDED THEREIN OR FOR THE PRODUCT.
The index is independently calculated by a third-party calculation agent.
Hypothetical and simulated examples have many inherent limitations and are generally prepared with the benefit of hindsight. There are frequently sharp differences between simulated results and the actual results. There are numerous factors related to the markets in general or the implementation of any specific investment strategy, which cannot be fully accounted for in the preparation of simulated results and all of which can adversely affect actual results. No representation is being made that any account, product, or strategy will or is likely to achieve profits, losses, or results similar to those shown.
The AQR DynamiQ Allocation IndexSM (the “Index”) embeds an annual index cost in the calculations of the change in index value. This embedded index cost will reduce any change in index value, and it funds certain operational and licensing costs for the Index. Since it will affect the return of the Index, it may also impact the amount of interest credited to an index annuity; however, it is not a fee paid by the policy owner or received by the issuing insurance company.
The AQR DynamiQ Allocation Index methodology adjusts exposures to achieve a volatility target. It is possible that the index could realize a volatility greater or less than its target.
Individuals cannot invest directly in an index.
This website and its contents have been provided to you 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. Any use of the information or data for commercial purposes or design of products is prohibited without the prior written consent of an authorized person of AQR.