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Rating:MarketWatch Columnist Looks at AQR and Defensive Equity Funds Not Rated 0.0 Email Routing List Email & Route  Print Print
Wednesday, July 18, 2012

MarketWatch Columnist Looks at AQR and Defensive Equity Funds

Reported by HFD

Prompted by AQR's launch of a quartet of mutual funds, Robert Powell at MarketWatch looked into defensive equity funds this week, and asked if investing in such funds is the right play. [MFWire on AQR's new funds].

Cliff Asness' AQR Capital Management [profile] launched four funds earlier this month that use "so-called defensive strategies designed to deliver equity-like returns with lower volatility than equities usually have."

Rob Isbitts, Sungarden Investment Research founder and chief investment strategist, told Powell that the AQR funds have pros and cons.

He is quoted as saying that AQR has $40 billion in AUM which is positive as well as the fact that it caps the expense ration of the defensive equity funds.

The negative side, according to Isbitts, is that a "purely quant approach may be too stringent for something like beta-focused investing in different market conditions than we have today."

Other funds with similar characteristics are the Guggenheim Defensive Equity ETF, PowerShares S&P 500 Low Volatility Portfolio and the QuantShares US Market Neutral Anti-Beta Fund.

Powell thinks these funds, or funds with defensive equity, should form part of your portfolio.

Jerry Miccolis, chief investment officer and principal at Brinton Eaton and Asset Allocation for Dummies co-author, said "these funds can be a good option for people wanting equity exposure but less risk."

But Miccolis reminds that investors still have to examine the assets that defensive funds invest in.

"Be aware of sector allocations relative to market cap," he said. 

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