Cliff Asness – The Past, The Present & Future of Quant

**Patrick O'Shaughnessy** (0:04)
Hello and welcome everyone. I'm Patrick O'Shaughnessy and this is Invest Like the Best. This show is an open-ended exploration of markets, ideas, methods, stories, and of strategies that will help you better invest both your time and your money. You can learn more and stay up-to-date at investorfieldguide.com.

**SPEAKER_3** (0:24)
Patrick O'Shaughnessy is the CEO of O'Shaughnessy Asset Management. All opinions expressed by Patrick and podcast guests are solely their own opinions and do not reflect the opinion of O'Shaughnessy Asset Management. This podcast is for informational purposes only and should not be relied upon as a basis for investment decisions.
Clients of O'Shaughnessy Asset Management may maintain positions and the securities discussed in this podcast.

**Patrick O'Shaughnessy** (0:49)
My guest this week is Cliff Asness, the managing and founding principal at AQR Capital Management. 20 years after its founding in 1998, AQR manages $226 billion across a number of quantitatively based investing strategies.
Cliff was an original quant researcher and he has long been one of the financial writers and thinkers that I look to for education and for inspiration.
I distinctly remember reading one paper in particular, Value and Momentum Everywhere, somewhat early in my career and thinking, this is the kind of research I want to do forever. You can always tell when talking to Cliff or hearing him speak that he just loves researching markets. There is a deep intellectual honesty in his work and a respect for thinkers at different ends of the market spectrum, from Gene Fama to Ken French to Jack Bogle to Dick Thaler and Robert Shiller.
Our conversation is about all things quant, past, present and future. Cliff touches on many of the big issues facing quant investing today and tells some great stories along the way. I hope you enjoy our conversation. Let's dive in. I always like to start these things very seriously, so we'll start with your favorite superhero and the reason why.

**Cliff Asness** (1:51)
I would say my favorite superhero, and I guess I have to be consistent because I've said this before, I've always been a Captain America fan.
As to why is harder, because I've been reading comic books since I was six, coming up with an origin story for my own liking of this character. I don't remember particularly when I was six, but I don't think it was necessarily the America aspect. There are a lot of patriotic whatever.
I'm pro-America. Let me go on the record there, but I don't think that was it. I think it was, if I were a DC fan, I probably would have been a Batman person. It was the lack of superpowers and competing with the superpowered people and keeping up and in fact, being their leader often, when he was just a dude who was in shape.

**Patrick O'Shaughnessy** (2:33)
It's like eking the most out of your potential or something like that.

**Cliff Asness** (2:36)
Well, that's literally what the super soldier formula is supposed to do. It does not give you superpowers.
It maximizes human potential.

**Patrick O'Shaughnessy** (2:43)
I love it. Second reference that's funny, why do you have Ka-Nama-Kala-Jerma on your Twitter profile?

**Cliff Asness** (2:48)
That's more sci-fi geek stuff.
Oh man, is this getting obscure? This is Robert E. Howard, who is the original creator of Conan, also created a character named King Kull, who many people have pointed out is in many ways staggeringly similar to Conan, kind of a different version. But his perpetual enemies were the so-called serpent men. I say so-called, they were serpent men, but they could take human form. And I can't even pronounce it as well as you did, but that was the shibboleth, that in some versions of the story, if you said they would be revealed, or in some versions, they just couldn't say it, and you'd figure out who they were.

**Patrick O'Shaughnessy** (3:26)
Like their facial structure or something wouldn't allow them to say it.

**Cliff Asness** (3:29)
So that's just random gibberish to see if anyone noticed.

**Patrick O'Shaughnessy** (3:34)
I love it.

**Cliff Asness** (3:34)
I'm trolling for fellow people who had no friends when they were nine.

**Patrick O'Shaughnessy** (3:39)
Well, let's get into our mutual world of kind of factor investing. And it's been certainly an interesting year. I love to spend-

**Cliff Asness** (3:46)
But by interesting, do you mean crappy?

**Patrick O'Shaughnessy** (3:48)
Yes, I do. Very little sleep during the entire year. So I'd love to kind of start at the high level and maybe we'll get into some of the specifics, especially around liquid also. I thought that paper was just really thought provoking. Maybe we beginning by asking the major changes that you've observed in the ways that factors, broadly speaking, are used by institutions in a portfolio.