AQR’s Momentum Fund Harvard Case Solution & Analysis


This case introduces AQR; a company engages in providing Retail fund service to the Low net-worth investors available in the market. Furthermore, the company in an attempt to increase its brand image in the market to attract potential investors, activefund momentum strategy. In which, the approachwas based on the fundamental concept that, if the stock had performed well in its past than it was estimated under the momentum strategy, then that stock would also perform well in its future and could be held responsible for generating higher returns for the portfolio manager. Moreover, it was assessedthat the momentum strategy had certain discrepancies which needed to be considered by the manager or the company. Which, in turn, would enable the company to avoid the adverse effect of the momentum strategy and allow them to generate ahigher return for their investors in the market. The momentum strategy includes two types of stock namely winners and losers, where winner stocks are those, which has been able to perform in their past and are expected to perform well in the future. Whereas, the loser stock are those, which had not performed up to mark in their past and are expected do the same in the future. However, the general idea for any fund was to invest for long-termin winner stocks and assess the market to potentially generate returns for losers stocks by investing in short-term. Additionally, under the strategy adopted by the company, a policy was imposed on AQR that, it would not invest in theshort term and only invest in long-term stocks.

AQR’s Momentum Fund Harvard Case Solution & Analysis

Therefore, the company developed effective plans to assess and analyze the condition of the market and the stocks; theywere considering to invest in. It would enable the company to determine, whether the stock was a winner or a loser. However, the company’s strategies only seem to encourage investing in winner stocks. Furthermore, it can be determinedthatan administrativerule was imposed on mutual funds that, they would keep their funds open-ended and transparent. That means that the investors could disinvest for the fund as per his requirement.That had tremendous implication for the company.As it needed to keep in their thought process that the customer could ask the company to windup its fund's portfolio. Therefore, the company needs to develop effective discrepancy plans to mitigate the adverse effect of investors disinterests in the fund. In addition to this, the company had to develop plans and set a clear criteria for the stock, that were outperforming and had high ranking in the index but, they had lost their optimal performance and are coming towards loser stocks. So that, a standard could be set that would enable the company to determine, by how much ranking if an individual stock losses that the company could consider to disinvest in such stock and look for alternative Stocks in the market that are moving up in the ranks...........................

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