After our analysis on the Macro funds and Mega funds, we analyzed 13F filings of the two large Quant Funds. Renaissance Technologies (or “Renaissance”) and AQR Capital (or “AQR”), with discretionary assets under management (AUM) of around US$165.9 bn and US$248.9 bn, have been one of the world’s best-known quantitative hedge funds. Through the 13F analysis, we aim to understand their performances and strategies amid the increased volatility and on-the-rally market.
Divergence between market value and number of stock holdings implied underperformance
Source: Whalewisdom.com
The number of stock holdings of AQR Capital have been increasing since 2020 Q1 from 2032 to 2170 and rose by 72 in Q3 on quarter-on-quarter basis. However, the market value of AQR Capital fell by 2.7% on QoQ basis. Such a divergence (increasing holdings with decreasing market value) implies underperformance of the fund that it failed to capture profit during the Q3 market rally.
Source: Whalewisdom.com
Regarding Renaissance, both the number of stock holdings and market value declined in Q3, reflecting its decreased holdings in US equities. It implies that the fund reduced its exposure on US equities. In other words, we expect that Renaissance has underperformed the S&P500 amid the market rally. According to MarketWatch, Renaissance has extended its recent run of poor performance and has recorded double-digit losses this year.
Increased concentration of top holdings, but remained highly diversified
Source: Whalewisdom.com
From the above table, both Renaissance and AQR Capital have increased the concentration of their top holdings (Top 5–20) in Q3, different from Mega funds which normally operated with high discipline and maintain top positions with a stable percentage of portfolio. Despite the increased concentration, both Renaissance and AQR Capital have maintained a relatively diversified portfolio with their top 20 holdings only accounted for 23.4% and 27.4% of the total holdings respectively, comparing with mega funds at around 40%. Maintaining the top position as a percentage of portfolio at a relatively low level might somehow reflect the diversification of two funds.
Source: Whalewisdom.com
Source: Whalewisdom.com
Renaissance focuses on mid cap, AQR prefers large cap
Source: Whalewisdom.com
Quant funds are characterised with their investment decisions based on advanced quantitative analysis like the utilization of algorithms and custom-built computer models in stock-picking. According the 13F filing, both of the funds have reduced their shares holding of all of the above stocks, maybe due to their valuations which suggested overpricing in the current market. Yet, most of these stock have been rising amid the market rally in Q3. This perhaps partially explained the underperformance of the two funds.
Based on 13F filings, Renaissance’s top 20 holdings are mainly mid-cap stock (highlighted in red are stocks with <US$100 bn market cap), while AQR Capital are holding a majority of large-to-mega-cap stock (highlighted in green are stocks with >US$200 bn) with the popular FAANGM except the “N” (NFLX.US). Both Biogen Inc. (BIIB. US) and Target Corporation (TGT. US) are the only 2 stocks, which are in Top 20 holdings of both funds.
