Cliff Asness Says Hedge Fund Managers Don't ‘Hedge’ Enough

  • AQR co-founder reiterates that their fees are too high
  • Manager say markets acting 'rationally' after Paris attacks

Cliff Asness, co-founder and managing principal of investment firm AQR Capital Management, said hedge funds don’t protect enough against potential market losses and reiterated that the industry charges clients too much.

“They don’t hedge enough,” Asness said in a "Bloomberg <GO>" television interview with Stephanie Ruhle and David Westin on Monday. “Over time, what they are supposed to do is hedge market risk. And they are supposed to do it at a reasonable price.”

Asness, whose AQR manages $136 billion in assets, has long criticized the level of fees charged by hedge fund managers, who are among the highest compensated on Wall Street. They traditionally charge clients 2 percent of assets as a management fee and take a 20 percent cut of profits. The industry has returned 0.1 percent this year through October, according to data compiled by Bloomberg, while the Standard & Poor’s 500 Index has gained 2.7 percent.

Asness said hedge funds should lag behind rising markets and outperform when they fall. He said that managers who provide capital in merger transactions when no one else can are valuable to the market.

Asness also said markets are acting “rationally” following the terrorist attacks in Paris on Friday.

“This is a human tragedy, but it doesn’t drive markets,” he said.

The Standard & Poor’s 500 Index climbed after its worst week since August, while European equities shrugged off earlier declines on the first trading day since the assault that killed at least 129 people in the French capital. Gold prices erased earlier gains and the yen strengthened on Monday. The history of terror incidents around the world over the last 15 years shows market reactions are often sharp and, increasingly, short-lived.

AQR is based in Greenwich, Connecticut.

Before it's here, it's on the Bloomberg Terminal.