By 2018, AQR had achieved the status of the second largest hedge fund manager in the world, and Cliff Asness and his two partners became billionaires according to Forbes. After a series of difficulties that lasted for five years, the company is now demonstrating impressive results thanks to an innovative investment strategy based on artificial intelligence.
The past year was significant for many hedge funds and quantitative companies, including AQR, headquartered in Greenwich. The total assets under the company’s management increased to $187 billion, marking a growth of $73 billion by 2025. All three co-founders, each of whom was already a billionaire, doubled their fortunes. This was reported by Forbes.
As of today, Cliff Asness, the Chief Investment Officer of AQR and the largest private shareholder with a 30% stake, has a net worth of $6.3 billion, placing him at 664th on the list of the world's richest people. His co-founders, John Liu and David Kabiller, also increased their fortunes, each now exceeding $2 billion. After working together at Goldman Sachs Asset Management, they founded AQR in 1998 and actively invest in the company’s funds, linking their wealth to its success.
Last year, the multi-strategy fund Apex AQR, managing assets of $6.7 billion, demonstrated a return of 19.4%, while the long-short fund Delphi, also with assets of $6.7 billion, showed a return of 16.7%. An anonymous source familiar with the situation reported that the average annual return of both funds over the past five years is 16.6%, while the S&P 500 averaged 14.4% per year. Among more than 20 open-end mutual funds at AQR, the market-neutral strategies fund with assets of $3.2 billion and about two thousand positions increased by 26.5% in 2025. Its average annual return over the past five years was 19.6%, while most funds in this category show around 8%.
If AQR maintains its current growth rate, the company could break its 2018 record when it managed assets totaling $226 billion. This is an impressive turnaround for a company that just four years ago managed less than $100 billion and faced challenges of low efficiency and client outflows.
These transformations coincided with the decision to implement artificial intelligence technologies and expand machine learning methods for analysis and trading. AQR, being a factor investor, used traditional methods and value investing metrics, such as the price-to-book ratio and return on equity, to find mispriced stocks. Previously, human analysts were involved in assessing the factors necessary for stock selection, but now this task is handled by machine learning, which allows for the discovery of complex relationships, real-time adjustments, and processing large volumes of data to find trading signals. Analysts now use natural language processing technologies, such as ChatGPT or Claude, to enhance their models.
Asness and Liu studied under Eugene Fama, the Nobel laureate in economics from the University of Chicago, and AQR was late in adopting AI, lagging behind Renaissance Technologies and D.E. Shaw. In 2018, AQR appointed its first head of machine learning, who lasted only seven months. His successor, Brian Kelly, a finance professor at Yale University, drew attention to the investment world. In December 2021, he co-authored a 140-page research paper concluding that more complex machine learning models more effectively predict stock returns and form investment portfolios compared to simpler models. Despite criticism from academics, AQR defended its employee's position and continues to assert that the findings are correct.
Later, Asness himself became an active proponent of AI, stating that AQR is "delegating more tasks to machines," which he believes could threaten his position. Nevertheless, company employees emphasize that AI and humans work as a team. One employee states, "Yes, AI and machine learning technologies help us achieve our goals, but this is merely an evolution, not a revolution."
However, the "revolution" affects the less visible distribution part of the business, where AQR seeks to meet the growing interest of financial advisors. They need funds that offer tax benefits for wealthy clients. Unlike AQR's traditional client base of pension funds and target-date funds, this new client base has become an important source of capital. The CEO of Affiliated Managers Group, a minority shareholder in AQR, noted at a recent meeting that the advisor client base provides "significant and organic capital growth," and his company, with a net annual income of $51 billion, largely owes this to AQR.
Among such rapidly growing areas are individually managed accounts using Flex, AQR's investment tool for long/short positions aimed at advisors and wealthy clients. This tax-advantaged portfolio includes stocks expected to rise in price while simultaneously "shorting" stocks expected to fall, aiming to profit from both. This tool also minimizes market fluctuations and reduces taxable payouts, allowing investors to keep more funds after taxes. According to the official website, a year ago, Flex managed $23.2 billion, and within nine months, this amount nearly doubled to $45.4 billion. Today, Flex accounts for nearly a quarter of all AQR assets.
Justin deTray, a consultant at the consulting firm WealthSpire in San Francisco, which manages $580 billion in assets, notes that Flex attracts registered investment advisors due to AQR's low fees and good reputation, which newcomers cannot boast of. Additionally, long-term factors play a role, such as new tech millionaires wanting to protect their capital after a prolonged stock market rise. "Many potential clients have unrealized gains from the 'Magnificent Seven' or hyperscalers, and these are indeed huge amounts," deTray asserts, drawing on his experience with clients. "AQR has excellent positions and every chance to occupy this niche."
Can AQR maintain its pace? Market volatility caused by the actions of U.S. President Donald Trump often benefits hedge funds and quantitative firms. However, AQR's future fate depends on its models' ability to outperform the market and the activity of other hedge funds that are also implementing their AI-based quantitative strategies.
The post How three billionaire investors doubled their fortunes in a year thanks to AI first appeared on K-News.
