Alpha Architect US Quantitative Value ETF · NASDAQ:QVAL
Alpha Architect US Quantitative Value ETF — AQR Capital Management — Investor Presentation (May 2023)
25 slides from Alpha Architect US Quantitative Value ETF's investor presentation, May 2023
Slide 1: Value: The End of the Beginning
Value: The End of the Beginning Cliff Asness Managing and Founding Principal May 2023 For Financial Professional and Institutional Investor Use Only
Slide 2: Disclosures
Disclosures The information set forth herein has been obtained or derived from sources believed by AQR Capital Management, LLC (“AQR”) to be reliable. However, AQR does not make any representation or warranty, express or implied, as to the information’s accuracy or completeness, nor does AQR recomme
Slide 3: Start of a Recovery after the Longest/Deepest Drawdown
Start of a Recovery after the Longest/Deepest Drawdown So where from here? More coming. Hypothetical Global Value Performance (Net of 20% Performance Fee) ~2017: Multiple AQR blogs and papers January 1, 1990 – March 31, 2023 showing value was not cheap 3.5 Cumulative Log Performance 3.0 2.5 2.0 2010
Slide 4: A Historic Dislocation in Value
A Historic Dislocation in Value Spreads in valuation across stocks are nearly the widest ever Value Spreads for Hypothetical AQR Industry-and-Dollar-Neutral Value Portfolios* All Country Universe** March 1, 1988 – March 31, 2023 4 3 Tech Bubble Global Financial Value Spread (Z-Score) Crisis 2 91st P
Slide 5: It's Not Just the FANGs (or Insert Your Favorite Acronym Here)
It’s Not Just the FANGs (or Insert Your Favorite Acronym Here) Removing the largest stocks doesn’t change the story Value Spreads for Hypothetical AQR Industry-and-Dollar-Neutral Value Portfolios* All Country Universe** with and without Largest 10% of Stocks in Each Region*** March 1, 1988 – March 3
Slide 6: Value's Cheapness Isn't an Artifact of "Intangibles"
Value’s Cheapness Isn’t an Artifact of “Intangibles” No matter how trendy that is to claim ☺ Value Spreads for Hypothetical AQR Industry-and-Dollar-Neutral Value Portfolios* All Country Universe** with and without Stocks with Top 10% Intangible Asset Values in Each Region *** March 1, 1988 – March 3
Slide 7: Is Value Just an Interest Rate Bet?
Is Value Just an Interest Rate Bet? No. Hypothetical U.S. Value Returns vs. Changes in Hypothetical U.S. Value Return Variability 10-Year Yields: Monthly Explained by 10-Year Yields December 1, 1983 – March 31, 2023 January 1, 2018 – March 31, 2023 Historical correlation = 0.08 Historical Unexplaine
Slide 8: Value in Times of Economic or Market Stress
Value in Times of Economic or Market Stress Value shows little sensitivity to recessions or market drawdowns Value hypothetical returns in last 10 NBER-defined recessions, January 1950 – March 2023 40% Industry-neutral HML 30% 20% 10% 0% -10% Eisenhower "Rolling Nixon Oil Crisis Energy/Volcker Iran/
Slide 9: Still a Historic Dislocation in Value
Still a Historic Dislocation in Value Current prices still imply a potential growth differential that has never been realized Hypothetical Expensive vs. Cheap Stocks: 5-year Implied vs. Historical Growth Rate Differential January 1, 1990 – March 31, 2023 100% 5-year Cuml. Growth Rate Differential (E
Slide 10: Expensive companies' growth advantage remains below average
Fundamentals of Value Expensive companies’ growth advantage remains below average 1-Year Changes in Fundamentals for Expensive vs Cheap Companies April 1, 1999 – March 31, 2023 30% 25% Expensive companies tend on average to grow their fundamentals (e.g. earnings, sales, operating cash flows) more qu
Slide 11: How Much Can We Expect Going Forward?
How Much Can We Expect Going Forward? Historically, value strongly outperformed following severe dislocations Global Composite Value Spread and Hypothetical AQR Global Value Backtest Performance (net) March 1, 1988 – March 31, 2023 Global Value Performance January 2000 – December 2003: +93% 4 17% 36
Slide 12: What Does a Value Recovery Look Like?
What Does a Value Recovery Look Like? It’s not always a straight path up and doesn’t always happen at the same pace U.S. Large Cap Value Performance During Recoveries Post Tech Bubble Value Recovery, March 10, 2000 – December 31, 2003 (Top X-Axis) Recent Period Value Recovery, November 9, 2020 – Mar
Slide 13: We're Not Just Value by the Way
We’re Not Just Value by the Way (Except occasionally when we are…) Though it might look that way currently! When we do look like value, we have historically become very counter-cyclical — actually smoothing full multi-year portfolio returns (i.e., we’ve lost when stocks soared and won when they’ve r
Slide 14: We're Not Just Value by the Way (cont...)
We’re Not Just Value by the Way (cont…) Some efforts I’m particularly excited about • Trading cost execution research • New applications of “known” signals: new markets, new approaches (e.g., economic trends) • Alternative approaches to signal weighting • Factor momentum everywhere • Machine learnin
Slide 15: What Have We Learned about Value during the Roundtrip?
What Have We Learned about Value during the Roundtrip? The link between risk levels and returns to the value factor has ramifications for sizing Intuition • Bubbles tend to form relatively quietly compared to how they ultimately unwind • How much exposure would you want in calm compared to volatile
Slide 16: Conclusion
Conclusion Value spreads hit levels considerably higher than the dot com bubbles in late 2020 Value spreads have come back, and returns have been strong since then, but spreads are still at the 91st percentile, and we believe there is much more to go Most of the time we’re not very correlated with v
Slide 17: Appendix
Appendix
Slide 18: Value-Focused Implementation
Implementation Choices should be based on constraints, conviction, and rest of portfolio Multi-Factor • Overweight value Multi-Factor Long-Only Multi- Long-Short Multi- • Remains diversified Factor Factor Value across factors Potential benefit from Potential benefit from • Other factors may suffer v
Slide 19: Disclosures
Disclosures This document has 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. AQR Capital Management is a glob
Slide 20: Disclosures
Disclosures HYPOTHETICAL PERFORMANCE RESULTS HAVE MANY INHERENT LIMITATIONS, SOME OF WHICH ARE DESCRIBED BELOW. NO REPRESENTATION IS BEING MADE THAT ANY FUND OR ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN HEREIN. IN FACT, THERE ARE FREQUENTLY SHARP DIFFERENCES BETWE
Slide 21: Disclosures
Disclosures Hypothetical AQR Style Premia Global Value (Net of Transaction Costs) Backtest This is an AQR backtest of a Value theoretical long/short style portfolio is based on monthly returns, undiscounted, gross of fees, net of transaction costs, excess of a cash rate proxied by the ICE BofAML U.S
Slide 22: Disclosures
Disclosures Hypothetical Fixed Leverage versus Fixed Volatility Value and Momentum backtests: Hypothetical AQR Global Developed Value and Momentum Factors (Fixed Leverage versus Fixed Volatility): The Hypothetical AQR Global Developed Value Factor is the factor return of a hypothetical Value portfol
Slide 23: Disclosures
Disclosures Information for clients in Australia AQR Capital Management, LLC, is exempt from the requirement to hold an Australian Financial Services License under the Corporations Act 2001, pursuant to ASIC Class Order 03/1100 as continued by ASIC Legislative Instrument 2016/396, ASIC Corporations
Slide 24: Disclosures
Disclosures Information for clients in Asia This presentation may not be copied, reproduced, republished, posted, transmitted, disclosed, distributed or disseminated, in whole or in part, in any way without the prior written consent of AQR Capital Management (Asia) Limited (together with its affilia
Slide 25: Slide 25
AQR Capital Management — Investor Presentation (May 2023) on 6ix