Top Five Equity Holdings of Quant Billionaire Cliff Asness of AQR Capital

AQR Capital Management LLC, run by former Goldman Sachs quant Clifford S. Asness, is a global investment management firm with nearly $154 billion assets under management. The Connecticut-based firm employs a wide array of investment strategies such as risk-parity, momentum, convertible arbitrage and event-driven strategies. The multi-billion-dollar firm, whose name stands for applied quantitative research, has been attempting to convert cutting-edge academic research in areas of finance and financial markets into successful quantitative strategies for both institutional and retail buyers.

In a rather long and detailed interview conducted by Institutional Investor Journals, a provider of research on portfolio management and strategy, outspoken quant manager Cliff Asness discussed about alpha, beta, exchange-traded funds, the 2-and-2o payment structure used by hedge funds, and other issues. Mr. Asness also touched a rather interesting topic about transparency in the hedge fund industry, saying that the hedge fund world has become a lot better in terms transparency in recent years due to investor pressure. More importantly, the billionaire money manager pointed out that investors should not seek to receive position-by-position transparency, but rather aim at understanding what a hedge fund actually do and how they pick stocks. This kind of transparency would help investors understand what they should pay for the multitude of strategies employed by hedge funds, according to Mr. Asness. Leaving this discussion aside, the following article will list AQR Capital Management’s five largest-equity holdings at the end of the first quarter of 2016, as well as discuss their performance year-to-date.

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#5. Alphabet Inc. (NASDAQ:GOOGL)

– Shares owned by AQR Capital Management as of March 31: 551,415

– Value of AQR Capital Management’s holding as of March 31: $420.68 Million

AQR Capital Management owned 551,415 Class A shares of Alphabet Inc. (NASDAQ:GOOGL) at the end of the March quarter, 7,189 shares more than at the end of the December quarter. The upped stake was valued at $420.68 million on March 31 and accounted for 0.8% of the firm’s entire portfolio. Alphabet, which people continue to call Google, has enjoyed impressive growth in recent years thanks to its search engine. The company dominates the global search engine industry, with a massive 89.4% global market share in April. Yahoo and Bing, Google’s closest competitors in the industry, had a combined market share of less than 8% in April. Alphabet also owns multimedia platform YouTube, which has by far the highest number of visits among all video-streaming platforms in the United States. One should not forget about Alphabet’s “Other Bets” segment, which will most likely unlock flouring revenue streams for the search giant in the upcoming years. Alphabet has seen its market value drop by 9% since the beginning of 2016. Andreas Halvorsen’s Viking Global Investors LP owns 2.05 million Class A shares of Alphabet Inc. (NASDAQ:GOOGL) as of March 31.

#4. Public Service Enterprise Group Inc. (NYSE:PEG)

– Shares owned by AQR Capital Management as of March 31: 4.63 Million

– Value of AQR Capital Management’s holding as of March 31: $474.45 Million

The Connecticut-based asset manager upped its position in Public Service Enterprise Group Inc. (NYSE:PEG) by 12% during the first three months of 2016 to 4.63 million shares. The quarter-end stake was worth $474.45 million and made up nearly 0.9% of the fund’s portfolio. The Newark-based power company has seen its shares gain 20% since the start of 2016. PSEG’s operating revenue for the first quarter of 2016 were $1.71 billion, down $290 million relative to the same period of the previous year. The decrease was mainly attributable to lower gas and electric revenues. PSEG currently offers shareholders a quarterly dividend of $0.41 per share, which yields 3.66% annually. In mid-March, analysts at Barclays raised the price target on PSEG to $47 from $45 and reiterated their ‘Equal Weight’ rating on the stock, saying that the company was growing while maintaining a healthy balance sheet. Israel Englander’s Millennium Management had 1.72 million shares of Public Service Enterprise Group Inc. (NYSE:PEG) in its portfolio at the end of March.

#3. PepsiCo Inc. (NYSE:PEP)

– Shares owned by AQR Capital Management as of March 31: 10.11 Million

– Value of AQR Capital Management’s holding as of March 31: $476.38 Million

The $154 billion-investment firm reduced its exposure to PepsiCo Inc. (NYSE:PEP) by 110,051 shares during the first quarter of 2016, ending the three-month period with 10.11 million shares valued at $476.38 million. PepsiCo has successfully diversified away from its soda-only original business, which has enabled the company to grow over the years despite experiencing a sustained decline in demand for sugary drinks. According to Susquehanna Financial Group analysts, carbonated soft-drink sale fell by 2.8% during the 12-week period that ended June 5. However, the company’s well-known Lay’s, Cheetos, Doritos, Ruffles, and Quaker foods and snacks have offset the negative impact of falling soda sales in recent years. PepsiCo has increased its annual dividend payment for 44 consecutive years, currently offering shareholders an annualized dividend yield of 2.91% or $3.01 per share. PepsiCo shares are up by 6% so far in 2016. Donald Yacktman’s Yacktman Asset Management reported ownership of 13.40 million shares of PepsiCo Inc. (NYSE:PEP) through the latest round of 13Fs.

#2. Microsoft Corporation (NASDAQ:MSFT)

– Shares owned by AQR Capital Management as of March 31: 13.13 Million

– Value of AQR Capital Management’s holding as of March 31: $725.15 Million

AQR Capital Management lifted its position in Microsoft Corporation (NASDAQ:MSFT) by 1.26 million shares during the January-to-March period to 13.13 million shares. The increased stake was worth $725.15 million at the end of the March quarter and made up roughly 1.3% of the firm’s entire portfolio. Just recently, Microsoft announced it would pay a massive $26.2 billion for LinkedIn Corp (NYSE:LNKD), but some investors may not have been overly excited given Microsoft’s history of bad acquisitions such as the one of Nokia’s phone business. Yet, there are some analysts and investors who are certain that the benefits of the LinkedIn-acquisition will exceed the seemingly high cost, as the access to more than 430 million LinkedIn members will enable the cross selling of Microsoft’s office productivity software and cloud services. Microsoft shares are 7.8% in the red year-to-date. Jeffrey Ubben’s ValueAct Capital had 56.62 million shares of Microsoft Corporation (NASDAQ:MSFT) in its portfolio on March 31.

#1. Apple Inc. (NASDAQ:AAPL)

– Shares owned by AQR Capital Management as of March 31: 6.70 Million

– Value of AQR Capital Management’s holding as of March 31: $730.33 Million

Apple Inc. (NASDAQ:AAPL) was the largest equity holding in Cliff Asness’ portfolio at the end of the March quarter, consisting of 6.70 million shares valued at $730.33 million. Mr. Asness and his team trimmed the Apple stake by 9% during the first three months of the year. The market value of the iPhone maker has declined by 9% since the beginning of the year, mainly due to investor worries over slowing iPhone sales. However, while iPhone unit sales will most likely keep falling in the years ahead due to market saturation, Apple could seek to make more money out of each iPhone user. For instance, the company’s Apple Music, which provides iPhone users unlimited streaming for a fee, could add to Apple’s bottom- and top-figures. Moreover, as Apple has roughly $216 billion in cash on its balance sheet and is allegedly interested in driverless cars, some believe that a possible acquisition of Tesla Motors Inc. (NASDAQ:TSLA) would make perfect economic sense. Warren Buffett’s Berkshire Hathaway acquired a new stake of 9.81 million shares of Apple Inc. (NASDAQ:AAPL) during the March quarter.

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