In 2009, Applied Quantitative Research (AQR) launched three low cost momentum funds: AQR Momentum (AMOMX), which invests in large cap momentum; AQR Small Cap Momentum (ASMOX); and AQR International Momentum (AIMOX). AQR was founded by Clifford S. Asness, Ph.D., David G. Kabiller, Robert J. Krail, and John M. Liew, Ph.D. in 1998 in Greenwich, Connecticut. Cliff Asness, Robert Krail, and John Liew were formerly leading the Quantitative Research Group at Goldman Sachs Asset Management (GSAM). The net expense ratio at the AQR Momentum fund is capped at 49 basis points (0.49%) through April 2011.
Momentum strategies usually work because investors under react to positive news about companies. This is one of the technical strategies that work in the stock market that efficient markets proponents have difficulty explaining. Insider Monkeydoesn’t believe in the efficient markets theory. But that doesn’t mean we support momentum strategies at this point. The graph below shows that AQR’s Small Cap Momentum Fund underperformed the iShares Russell 2000 index fund (IWM) during the past 12 months.