Episode summary
Re-Run: Cliff Asness | Money Stuff: The Podcast
Money Stuff The Podcast
· · Hosts: Matt Levine, Katie Greifeld · Guests: Cliff Asness
Summary
Cliff Asness argues that active management is fundamentally about taking the other side of trades that other investors do not want, and that quants like AQR try to do that with small, diversified bets rather than concentrated stock-picking. He says momentum, value, profitability, and low beta all fit into a broader framework where prices may underreact or overreact to information, and where machine learning mostly improves the same basic process rather than changing its spirit.
He draws a line between classic quant work and old-school Graham and Dodd investing, saying the two have converged around a more holistic idea of cheap, high-quality companies, even if quants express it in factor language. He also says market timing remains hard, but trend following on macro assets is a legitimate, diversified way to do it. On academia, he says AQR publishes when the work is no longer proprietary, but not on true alpha.
The conversation turns skeptical on fees and private markets. Asness argues that many alts charge too much for what is really beta, that private equity often benefits from volatility laundering, and that the push toward private assets can hide expensive beta behind alpha-like pricing. He is more sympathetic to behavioral explanations than he was early in his career, citing the dot-com bubble, GameStop, and meme stocks as evidence that markets can stay irrational longer than the old models allowed.
Key takeaways
- Asness says AQR’s job is to take the other side of mispriced or hard-to-bear positions, usually with small bets and broad diversification.
- He thinks momentum works because of a mix of underreaction and overreaction, with behavioral explanations becoming more important over time.
- He says machine learning and NLP are evolutionary tools for the same basic alpha-seeking process, not a wholesale replacement for quant investing.
- Asness argues that many alternative strategies and private assets charge alpha-like fees for returns that are often mostly beta.
- He says private equity’s reported risk is often understated because illiquidity and stale pricing can make volatility look artificially low.
- He thinks market timing is still very hard, but trend following is a more scalable, diversified version of it.
Notable quotes
“There are two competing explanations in academia and the general world that cares about these things for why momentum on average works”
“If you're using past returns to predict the future, just what's going up will keep going up and vice versa”
“The optimal time to publish a paper is after you've made money from something for 11 years and an hour and a half before someone else is going to publish the paper”
“I think a tremendous amount of the private world is charging massive alpha fees for beta”
How the episode opens
Bloomberg Audio Studios podcasts, radio news. — I was hoping to be like one of those like clips on TikTok you see of fake. — That's the thing. You look like you're on a podcast when you got the headphones on. — Yeah. Now it just looks like, you know,
Instead of we just randomly got together to chat — And put these microphones in front of us. — Part of it is like — With Bloomberg podcasts behind us. — Yeah. Right. I guess we've conveyed podcast efficiently with all of the Bloomberg podcast signage.
That's true. Part of the reason this has to be on video is because Matt shaved. Matt has had a beard for the past. I I've had a winter beard from like Christmas break through Memorial Day. — I shaved over CO for the first time in about 30 years.
Okay. — And my kids freaked out. — Yeah. — They were like, "You're an alien." — Yeah. My kids didn't care that much, but one of my sons said, "It's a different daddy." — Well, you also have hair on the top of your head. When you shave the beard and you don't have any hair, suddenly you're Mr. Clean. You just
Yeah. Does Mr. Clean not be He doesn't. — No, — I don't think so. — Mr. Clean. You know, clean. Come on. — I think that's a fair point. 15. Uh, — Mr. Clean Shaving. — All right. All right. — It's the Money Stuff Podcast. We have a guest, Cliff Haznes, who runs AQR. Thanks for coming in.
Thanks for having me. I always like to ask hon managers like what do you do for a living? Like what is the like economic function of like the business that you run?
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- momentum
- meme stocks
- value investing
- market timing
- factor investing
Companies and tickers mentioned
- AQR
Watch the episode
Watch “Re-Run: Cliff Asness | Money Stuff: The Podcast” on YouTube
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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