Cliff Asness
Encyclopedia
Clifford Scott 'Cliff' Asness (born October 1966) is an American
hedge fund
manager and quantitative financial
theorist.
theorist and empiricist. Asness' dissertation, however, showed that consistent market-beating profits were attainable by exploiting value
and momentum
. In this context, value means using fundamental analysis
to assess the true worth of a security and momentum means betting that it will continue to go up or down as it has in the recent past. Neither idea is original with Asness, but he was the first to compile enough empirical evidence across a wide variety of markets to bring the ideas into the academic financial mainstream. The two ideas are supposed to work together. Value investors make money, but may have to wait a very long time for it, with a lot of mark-to-market pain along the way. Momentum investors also make money, but can suffer huge drawdowns when bubbles pop. Buying cheap things after they have already started going up, and selling expensive things after they have already started going down, can be the best of both worlds. However, the strategy for accumulation
is subject to the same constraints as any other and systemic effects in markets can invalidate it: AQR and other similar ventures lost massive amounts of wealth in the Financial crisis of 2007-2010.
From Chicago, Cliff Asness moved to Goldman Sachs to be managing director and director of quantitative research for Goldman Sachs Asset Management. In that capacity he founded the Goldman Sachs Global Alpha Fund, a systematic trading hedge fund run for Goldman Sachs employees and clients. In 1997 he left to found AQR Capital Management
, which today manages about $26 billion in a variety of traditional products and hedge funds. He continued to author academic papers in the field of portfolio management.
and other television programs. He has frequently spoken out against high hedge fund fees. In particular, he has been critical of hedge funds with high correlations to equity markets, delivering stock index fund performance (which is available cheaply) at prices that could only be justified by extraordinary market insight that only the best hedge funds seem to deliver consistently.
In 2008, he complained about short-selling restrictions in The New York Times. In a 2010 Wall Street Journal op-ed (written with Aaron Brown
) he claimed the Dodd-Frank financial reform bill would lead to regulatory capture, crony capitalism and a massive "financial-regulatory complex." In Bloomberg
columns, he discussed taxation of investment managers and healthcare reform. He posts commentary on financial issues, generally from a libertarian and efficient markets slant.
Asness is known for taking some outspoken contrarian stances, like in calling out the tech bubble (Bubble Logic, 2000) and those who claimed options should not be expensed (Stock Options and the Lying Liars Who Don't Want to Expense Them, 2004).
He is also known as an outspoken critic of the Obama Administration. Two tracts he authored protest Obama administration treatment of Chrysler senior bondholders.
BS in Engineering summa cum laude from the Moore School of Electrical Engineering at the University of Pennsylvania
MBA with high honors from the University of Chicago
Ph.D. in Finance from the University of Chicago
Editorial board of the Financial Analysts Journal
Governing board of the Courant Institute of Mathematical Finance at NYU
Co-head of the Leadership Council of the Robin Hood Foundation
Board of the International Rescue Committee.
Asness, Cliff, 1992, “Changing Equity Risk Premia and Changing Betas Over the Business Cycle and January”, University of Chicago.
Asness, Cliff, 1992, “Negative Expected Equity Returns and the Business Cycle”, University of Chicago.
Asness, Cliff, 1992, “The Term Structure of Expected Equity Returns and the Business Cycle”, University of Chicago.
Asness, Cliff, 1993, “OAS Models, Expected Returns, and a Steep Yield Curve”, Journal of Portfolio Management, Summer.
Asness, Cliff, 1995, “Fundamental Differences Between Agency and Non-Agency Mortgage-backed Securities”, Whole Loan CMOs, eds. Frank Fabozzi, Chuck Ramsey and Frank Ramirez.
Asness, Cliff, 1995, “The Power of Past Stock Returns to Explain Future Stock Returns”, Goldman Sachs Asset Management.
Asness, Cliff, 1996, “Global Tactical Asset Allocation”, Goldman Sachs Pension and Endowment Forum, September.
Asness, Cliff, 1996, “One Reason Not to Avoid Market Timing”, AQR Capital Management working paper.
Asness, Cliff, 1996, “Why Not 100% Equities”, Journal of Portfolio Management, Winter.
Asness, Cliff, 1997, “The Interaction Between Value and Momentum Strategies”, Financial Analysts Journal, March/April.
Asness, Cliff, 1998, “Market-neutral Investing: Putting the ‘Hedge’ in ‘Hedge Funds’ ”, AQR Capital Management working paper.
Asness, Cliff, 2000, “Bubble Logic: Or, How to Learn to Stop Worrying and Love the Bull”, AQR Capital Management working paper, 2001.
Asness, Cliff, 2000, “Stocks vs. Bonds: Explaining the Equity Risk Premium”, Financial Analysts Journal, March/April.
Asness, Cliff, 2003, “Fight the Fed Model”, Journal of Portfolio Management, Fall.
Asness, Cliff, 2004, “Stock Options and the Lying Liars Who Don’t Want to Expense Them”, Financial Analysts Journal, July/August 2004
Asness, Cliff, 2004, "An Alternative Future: An exploration of the role of hedge funds.", The Journal of Portfolio Management, 30th Anniversary Issue 2004.
Asness, Cliff, 2004, "An Alternative Future II: An exploration of the role of hedge funds.", The Journal of Portfolio Management, Fall 2004.
Asness, Cliff, 2005, "Rubble Logic: Or, What Did We Learn From the Great Stock Market Bubble?", Financial Analysts Journal, November/December 2005.
Asness, Cliff, and Jonathon Beinner, 1994, “Forward Rates and CMO Portfolio Management”, CMO Portfolio Management, ed. Frank Fabozzi.
Asness, Cliff, Jacques Friedman, Robert Krail and John Liew, 2000, “Style Timing: Value vs. Growth”, Journal of Portfolio Management, Spring.
Asness, Cliff, Robert Krail and John Liew, 2001, “Do Hedge Funds Hedge?” AQR Capital Management
Asness, Cliff, John Liew and Ross Stevens, 1997, “Parallels Between the Cross-sectional Predictability of Stock and Country Returns”, Journal of Portfolio Management, Spring.
Asness, Cliff, R. Burt Porter and Ross Stevens, 2000, “Predicting Stock Returns Using Industry-relative Firm Characteristics”, On Review with the Journal of Finance.
Asness, Cliff, and Michael Smirlock, 1991, “REIT Bankruptcy and Intra-industry Information Transfers: An Empirical Analysis”, Journal of Banking and Finance, December.
Asness, Cliff, and Michael Smirlock, 1994, “Valuation of PAC Bonds Without Complex Models”, CMO Portfolio Management, ed. Frank Fabozzi.
Asness, Cliff, Tobias Moskowitz, and Lasse Heje Pedersen, “Value and Momentum Everywhere”, (July 2008).
Asness, Cliff, Roni Israelov, and John Liew, 2010, “International Diversification Works (in the Long Run)”, AQR Capital Management Working Paper.
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...
hedge fund
Hedge fund
A hedge fund is a private pool of capital actively managed by an investment adviser. Hedge funds are only open for investment to a limited number of accredited or qualified investors who meet criteria set by regulators. These investors can be institutions, such as pension funds, university...
manager and quantitative financial
Mathematical finance
Mathematical finance is a field of applied mathematics, concerned with financial markets. The subject has a close relationship with the discipline of financial economics, which is concerned with much of the underlying theory. Generally, mathematical finance will derive and extend the mathematical...
theorist.
Background
After graduating with dual degrees from the University of Pennsylvania, Cliff Asness entered the finance PhD program at the University of Chicago and became the research assistant to Eugene Fama, the influential efficient marketEfficient market hypothesis
In finance, the efficient-market hypothesis asserts that financial markets are "informationally efficient". That is, one cannot consistently achieve returns in excess of average market returns on a risk-adjusted basis, given the information available at the time the investment is made.There are...
theorist and empiricist. Asness' dissertation, however, showed that consistent market-beating profits were attainable by exploiting value
Value investing
Value investing is an investment paradigm that derives from the ideas on investment and speculation that Ben Graham and David Dodd began teaching at Columbia Business School in 1928 and subsequently developed in their 1934 text Security Analysis...
and momentum
Momentum investing
Momentum investing, also sometimes known as "Fair Weather Investing", is a system of buying stocks or other securities that have had high returns over the past three to twelve months, and selling those that have had poor returns over the same period...
. In this context, value means using fundamental analysis
Fundamental analysis
Fundamental analysis of a business involves analyzing its financial statements and health, its management and competitive advantages, and its competitors and markets. When applied to futures and forex, it focuses on the overall state of the economy, interest rates, production, earnings, and...
to assess the true worth of a security and momentum means betting that it will continue to go up or down as it has in the recent past. Neither idea is original with Asness, but he was the first to compile enough empirical evidence across a wide variety of markets to bring the ideas into the academic financial mainstream. The two ideas are supposed to work together. Value investors make money, but may have to wait a very long time for it, with a lot of mark-to-market pain along the way. Momentum investors also make money, but can suffer huge drawdowns when bubbles pop. Buying cheap things after they have already started going up, and selling expensive things after they have already started going down, can be the best of both worlds. However, the strategy for accumulation
Financial capital
Financial capital can refer to money used by entrepreneurs and businesses to buy what they need to make their products or provide their services or to that sector of the economy based on its operation, i.e. retail, corporate, investment banking, etc....
is subject to the same constraints as any other and systemic effects in markets can invalidate it: AQR and other similar ventures lost massive amounts of wealth in the Financial crisis of 2007-2010.
From Chicago, Cliff Asness moved to Goldman Sachs to be managing director and director of quantitative research for Goldman Sachs Asset Management. In that capacity he founded the Goldman Sachs Global Alpha Fund, a systematic trading hedge fund run for Goldman Sachs employees and clients. In 1997 he left to found AQR Capital Management
AQR Capital
AQR Capital Management is a hedge fund founded in 1998 by former Goldman Sachs trader, Clifford S. Asness.-Description and history:The firm invests in public equity and hedges markets across the globe...
, which today manages about $26 billion in a variety of traditional products and hedge funds. He continued to author academic papers in the field of portfolio management.
Books about Asness
- Richard Lindsey and Barry Schachter's How I Became a Quant: Insights from 25 of Wall Street's Elite (Wiley, 2009) contains an autobiographical chapter by Cliff Asness.
- Scott PattersonsScott Patterson (author)Scott Patterson is a financial reporter who follows technology and complex trading strategies and how they affect Main Street. His work has also been featured in the New York Times, Rolling Stone and Mother Earth News. He is an alumnus of James Madison University. He lives in New York City...
The Quants: How a New Breed of Math Whizzes Conquered Wall Street and Nearly Destroyed It (Crown Business, 2010) contains extensive accounts of Cliff Asness' career and credits him with ending the Quant Equity Crash of August 2007 by being the first quant manager to go back into the market. - Joe Nocera's Good Guys and Bad Guys: Behind the Scenes with the Saints and Scoundrels of American Business (and Everything in Between) (Portfolio, 2008).
Economic and political commentary
Cliff Asness frequently comments on financial issues in print and on CNBCCNBC
CNBC is a satellite and cable television business news channel in the U.S., owned and operated by NBCUniversal. The network and its international spinoffs cover business headlines and provide live coverage of financial markets. The combined reach of CNBC and its siblings is 390 million viewers...
and other television programs. He has frequently spoken out against high hedge fund fees. In particular, he has been critical of hedge funds with high correlations to equity markets, delivering stock index fund performance (which is available cheaply) at prices that could only be justified by extraordinary market insight that only the best hedge funds seem to deliver consistently.
In 2008, he complained about short-selling restrictions in The New York Times. In a 2010 Wall Street Journal op-ed (written with Aaron Brown
Aaron C. Brown
Aaron C. Brown is an American finance professor, author and quant. He wrote Red-Blooded Risk: The Secret History of Wall Street, The Poker Face of Wall Street and A World of Chance...
) he claimed the Dodd-Frank financial reform bill would lead to regulatory capture, crony capitalism and a massive "financial-regulatory complex." In Bloomberg
Bloomberg Markets
Bloomberg Markets is a monthly magazine published by Bloomberg L.P.. It is aimed at financial experts and professionals. It focuses on financial decisions and philosophies of major personalities in the financial world, such as the CEOs of large banks and the people who wield political power over...
columns, he discussed taxation of investment managers and healthcare reform. He posts commentary on financial issues, generally from a libertarian and efficient markets slant.
Asness is known for taking some outspoken contrarian stances, like in calling out the tech bubble (Bubble Logic, 2000) and those who claimed options should not be expensed (Stock Options and the Lying Liars Who Don't Want to Expense Them, 2004).
He is also known as an outspoken critic of the Obama Administration. Two tracts he authored protest Obama administration treatment of Chrysler senior bondholders.
Education
BS in Economics summa cum laude from the Wharton School at the University of PennsylvaniaBS in Engineering summa cum laude from the Moore School of Electrical Engineering at the University of Pennsylvania
MBA with high honors from the University of Chicago
Ph.D. in Finance from the University of Chicago
Boards
Editorial board of the Journal of Portfolio ManagementEditorial board of the Financial Analysts Journal
Governing board of the Courant Institute of Mathematical Finance at NYU
Co-head of the Leadership Council of the Robin Hood Foundation
Board of the International Rescue Committee.
Selected academic publications
Arnott, Robert D. and Cliff Asness. “Surprise! Higher Dividends = Higher Earnings Growth”, Financial Analysts Journal, Jan/Feb 2003, Vol. 59, Number 1, AIMR Graham and Dodd Award, 2003.Asness, Cliff, 1992, “Changing Equity Risk Premia and Changing Betas Over the Business Cycle and January”, University of Chicago.
Asness, Cliff, 1992, “Negative Expected Equity Returns and the Business Cycle”, University of Chicago.
Asness, Cliff, 1992, “The Term Structure of Expected Equity Returns and the Business Cycle”, University of Chicago.
Asness, Cliff, 1993, “OAS Models, Expected Returns, and a Steep Yield Curve”, Journal of Portfolio Management, Summer.
Asness, Cliff, 1995, “Fundamental Differences Between Agency and Non-Agency Mortgage-backed Securities”, Whole Loan CMOs, eds. Frank Fabozzi, Chuck Ramsey and Frank Ramirez.
Asness, Cliff, 1995, “The Power of Past Stock Returns to Explain Future Stock Returns”, Goldman Sachs Asset Management.
Asness, Cliff, 1996, “Global Tactical Asset Allocation”, Goldman Sachs Pension and Endowment Forum, September.
Asness, Cliff, 1996, “One Reason Not to Avoid Market Timing”, AQR Capital Management working paper.
Asness, Cliff, 1996, “Why Not 100% Equities”, Journal of Portfolio Management, Winter.
Asness, Cliff, 1997, “The Interaction Between Value and Momentum Strategies”, Financial Analysts Journal, March/April.
Asness, Cliff, 1998, “Market-neutral Investing: Putting the ‘Hedge’ in ‘Hedge Funds’ ”, AQR Capital Management working paper.
Asness, Cliff, 2000, “Bubble Logic: Or, How to Learn to Stop Worrying and Love the Bull”, AQR Capital Management working paper, 2001.
Asness, Cliff, 2000, “Stocks vs. Bonds: Explaining the Equity Risk Premium”, Financial Analysts Journal, March/April.
Asness, Cliff, 2003, “Fight the Fed Model”, Journal of Portfolio Management, Fall.
Asness, Cliff, 2004, “Stock Options and the Lying Liars Who Don’t Want to Expense Them”, Financial Analysts Journal, July/August 2004
Asness, Cliff, 2004, "An Alternative Future: An exploration of the role of hedge funds.", The Journal of Portfolio Management, 30th Anniversary Issue 2004.
Asness, Cliff, 2004, "An Alternative Future II: An exploration of the role of hedge funds.", The Journal of Portfolio Management, Fall 2004.
Asness, Cliff, 2005, "Rubble Logic: Or, What Did We Learn From the Great Stock Market Bubble?", Financial Analysts Journal, November/December 2005.
Asness, Cliff, and Jonathon Beinner, 1994, “Forward Rates and CMO Portfolio Management”, CMO Portfolio Management, ed. Frank Fabozzi.
Asness, Cliff, Jacques Friedman, Robert Krail and John Liew, 2000, “Style Timing: Value vs. Growth”, Journal of Portfolio Management, Spring.
Asness, Cliff, Robert Krail and John Liew, 2001, “Do Hedge Funds Hedge?” AQR Capital Management
Asness, Cliff, John Liew and Ross Stevens, 1997, “Parallels Between the Cross-sectional Predictability of Stock and Country Returns”, Journal of Portfolio Management, Spring.
Asness, Cliff, R. Burt Porter and Ross Stevens, 2000, “Predicting Stock Returns Using Industry-relative Firm Characteristics”, On Review with the Journal of Finance.
Asness, Cliff, and Michael Smirlock, 1991, “REIT Bankruptcy and Intra-industry Information Transfers: An Empirical Analysis”, Journal of Banking and Finance, December.
Asness, Cliff, and Michael Smirlock, 1994, “Valuation of PAC Bonds Without Complex Models”, CMO Portfolio Management, ed. Frank Fabozzi.
Asness, Cliff, Tobias Moskowitz, and Lasse Heje Pedersen, “Value and Momentum Everywhere”, (July 2008).
Asness, Cliff, Roni Israelov, and John Liew, 2010, “International Diversification Works (in the Long Run)”, AQR Capital Management Working Paper.