Clifford Scott Asness

 Clifford Scott Asness (/ˈæznəs/; born October 17, 1966) is an American hedge fund manager and the co-founder of AQR Capital Management. According to an April 2020 Forbes profile, Asness' estimated net worth was $2.6 billion.^[1]

Early life and education[edit]

Asness was born to a Jewish family, in Queens, New York, the son of Carol, who ran a medical education firm, and Barry Asness, an assistant district attorney in Manhattan. His family moved to Roslyn Heights, New York when he was four. He attended the B'nai B'rith Perlman Camp and graduated from Herricks High School.^[2]

In 1988, Asness graduated summa cum laude from the University of Pennsylvania, from which he received bachelor's degrees in computer science and finance as part of the Jerome Fisher Program in Management and Technology (M&T).^[3] Asness's interest in finance and portfolio management began while he worked a research assistant in the Finance Department at Wharton,^[3] where he learned to use "coding computer programs" to analyze markets" and "test economic and financial theories".^[4]

In 1989, Asness enrolled at the University of Chicago, where he received his MBA with high honors in 1991 and his PhD in finance in 1994.^[5][6] At Chicago, Asness was the Teaching Assistant (TA) for his dissertation adviser, Nobel laureate Eugene Fama^[6][3] — who was also Asness' mentor^[7] — and the economist, Kenneth French, who were both influential and widely-respected empirical financial economists, had established the foundations of their Fama–French three-factor model in 1992.^{[8][Notes 1]} Fama and French had contrasted value stocks with growth stocks. Since Fama and French's inception of value stocks, "quants have designed algorithms that can scour market data" looking for "factors".^[9]

Asness' doctoral dissertation was on "the performance of momentum trading, buying stocks with rising prices". Asness asserted that profits consistently beating market averages were attainable by exploiting both value and momentum. Asness concept of value was referred to in the context of fundamental analysis as a way of assessing the true worth of a security. His use of the concept of momentum referred to betting that the value will continue to go up or down as it did in the recent past. While he did not originate these concepts, Asness was credited with being the first to compile enough empirical evidence across a wide variety of markets to bring the ideas into the academic financial mainstream.^[6]

Career[edit]

Global Alpha[edit]

Asness started his career in 1990, when he was 24 and still a PhD student.^[7] In the early 1990s, he had left academia, to the regret of his mentor, to become manager of Goldman Sachs Asset Management's (GSAM) "new quantitative research desk." He invited two friends from his cohort at the University of Chicago to join him at GSAM. Together, they began "developing models to evaluate risk in currencies, bonds and entire economies."^[4] While the "idea of factors" came from Fama and French, it was first "put into practice" in the late 1990s by Asness, according to The Economist.^[9] Asness and his team at GSAM built on Fama and French's idea of factors,^[8] and combined their work with insights he had gained from his own PhD research.^[3][9] Asness worked as GSAM manager until 1997, when he and some members of the GSAM team, left to start their own quantitative hedge fund.^[4][10]

In 1995, Asness persuaded a few partners at Goldman to provide him with an initial US$10-million investment to employ the computer-driven models that his team had developed, to invest in the market.^[4][11][12]

When the $10 million initial investment reached $100 million, Goldman opened the fund to the public—the Goldman Sachs Global Alpha Fund.^[4] Global Alpha, a systematic trading hedge fund was one of the earliest "quant vehicles" in the industry. The fund became known for high-frequency trading and furthered the careers of Asness and Mark Carhart.^[12] Asness and his team used complicated computerized trading models to first locate underpriced equities, bonds, currencies, and commodities and then use short selling to take advantage of upward or downward price momentum.^[13] The fund was designed to make money regardless of the direction the market was moving.^[13] The Wall Street Journal described Asness and Carhart as "gurus" who managed Global Alpha, a "big, secretive hedge fund"—the "Cadillac of a fleet of alternative investments" that had made millions for Goldman Sachs by 2006.^[14] By 2007, at its height, Global Alpha was "one of the biggest and best performing hedge funds in the world" with more than $12 billion assets under management (AUM).^[15] Global Alpha was shutdown in the fall of 2011.^[11] The quant fund had declined significantly by mid-2008, and continued its decline to $1 billion AUM through 2011.^[16]