Most financial prognosticators are out making 2025 predictions and talking about what they got right (or wrong) in 2024. But not Cliff Asness. The acerbic-tongued co- founder of $114 billion AQR Capital Management could be out crowing about his fund’s double-digit returns in recent years, including 2024.
Last year AQR’s Delphi long-short equity strategy was up 24.1 percent net; its APEX strategy — market neutral, arbitrage and directional macro — gained 15.1 percent, and its Helix trend-following strategy rose 17.9 percent, according to a person familiar with the numbers.
But Asness preferred to go back to the future and see how today’s hot trades will look ten years on. His overall assessment? “Hard times are never pleasant.”
In a satire using the voice of an unnamed allocator writing a letter in 2035, Asness bemoaned the fact that U.S. equities “barely” beat cash over the decade, bonds were subpar, private equity underperformed the public markets, private credit was reminiscent of CDOs-squared, the complex structured products of the global financial crisis, and bitcoin had crashed to $10,000.
Aside from an occasional sardonic tweet, the attack on crypto was new for Asness.
“Prior to 2025 we had stayed away,” the fictional allocator wrote. “We had thought it quite silly that just leaving computers running for a really long time created something of value. But when bitcoin hit $100,000 we realized we had missed out on the next big thing and that leaving computers running really did build digital gold (and we ‘learned’ that scarcity of something leads to anything scarce going up forever, even if it’s useless.)”
After eventually taking the crypto position to 5 percent of the portfolio, the allocator complained, “bitcoin is at about $10,000.”
Asness’s biggest gripes, as usual, were saved for private assets.
“In all honesty, we had hoped for much more protection from this volatility from our extensive (like half the portfolio at the peak) allocation to privates,” his allocator wrote. “Alas, sadly, and totally unforeseeably, it turned out that levered equities are still equities even if you only occasionally tell your investors their prices (and when you do, you do not really move prices that much). Disappointing, but PE acting like equities would have been tolerable if they had actually outperformed public markets, but they underperformed.”
As Asness noted, internal rates of return on private equity had outperformed total returns on public equity over the previous 30 years. But what his allocator didn’t count on was the outperformance reversing. “I mean, what better way is there to estimate what will happen in the future than looking at what happened in the past!?” he quipped.
For the first time, Asness took a swipe at private credit. As the allocator put it: “The final blow was when it turned out that private credit, the new darling by 2025, was just akin to really high fee public credit (and the [synthetic risk transfers] private credit loved proved we all learned nothing from CDOs^2). Like private equity vis-a-vis public equity, private credit turned out to be at least as risky as its public counterpart — and after much higher fees, performed worse.”
The market was overcrowded, leading to lower expected returns, according to Asness.
Moreover, he suggested that “The claims of some private credit managers to have realized a Sharpe ratio of 10.0 turned out to be gigantically overstated and actually the wrong sign. Who would have thought that providing loans to unrated, middle market companies actually had credit risk and volatility?”
