Cliff Asness of AQR was interviewed on Morningstar recently. He’s a bit of the prom king this year with respect to performance. While AQR has struggled this past decade, it dazzled year to date, with his main absolute return (multi-strategy) fund up 35% YTD through the end of May, while the S&P is down ~14% as of today.
What is more interesting is how Cliff views “value” today and its position vs the historical mean. More specifically, he measures “within industry” value, meaning the spread between statistically cheap and expensive stocks within same industries (e.g., cheap IT vs expensive IT). The cumulative measure of his “within industry” value spread has started to collapse, but still resides far from the mean:
With anything, one chart does not explain the future, but it’s just one more arrow in an investor’s quiver to aid in staying away from trouble.
It’s worth noting that Cliff isn’t a traditional value guy, he’s more a factor investor. His firm runs a multi-strategy fund including trend following / momentum, alternative risk premia (likely things like disaster insurance, life settlements, etc.), commodities, long/short, etc. So he’s not just another vanilla value investor banging the “things are expensive” drum without much insightful context.
While the business of predicting the future gets the most airplay during times of higher uncertainty, like now, the general saying goes is the only thing certain is that nothing is certain. With that certainty, we continue to re-invest modestly and move on with life.