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Analyzing AQMIX’s Investment Methodology

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AQMIX’s investment methodology

“Managed Futures” is a popular hedge fund strategy. It uses a combination of future and forward contracts as a tool for investment. Investors turn to the “Managed Futures” strategy mainly because of its ability to reduce the overall portfolio risk. Taking long and short positions in rising and falling assets, respectively, helps reduce the portfolio’s overall market risk.

The AQR Managed Futures Strategy Fund STR I (AQMIX) uses “Managed Futures” as its principle investment strategy in building its portfolio.

An asset allocation breakdown of AQMIX is presented in the above graph.

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Asset allocation

The fund gains exposure to more than 100 futures as well as forward and swaps contracts of fixed income, interest rate, commodity, and global equities. AQMIX’s top ten holdings represent 28.7% of its total portfolio. It’s important to note that 9.4% of the fund’s total portfolio is allocated towards government securities. AQMIX’s significant equity holdings include the FTSE China A50 Index Futures and the Nikkei 225 Index Future.

Valuation multiple and Sharpe ratio

As of December 10, 2015, AQMIX has a price-to-dividend yield of 3.9%. AQMIX’s three-year Sharpe ratio, a popular measure of risk, is 0.92%. This proves the low-risk nature of AQMIX’s managed futures portfolio.

AQMIX’s top significant equity holdings are the KOSPI 200 Index Futures, the Hang Seng Index Futures, and the S&P/TSE 60 Index Futures. The Hang Seng includes significant holdings like Tencent (TCEHY), CNOOC (CEO), Lenovo Group (LNVGY), China Construction Bank (CICHY), and PetroChina (PTR).

In the next part of the series, we’ll analyze the impact of adding AQMIX to a portfolio.

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