# AQR Capital Management **AQR Capital Management** is an investment firm based in Greenwich, Connecticut, founded in 1998 by [[Cliff Asness]], David Kabiller, Robert Krail and John Liew. It picks investments by formula, not by judgment: its computers rank thousands of securities on measurable traits such as how cheap they are and how they have been moving, then buy the high scorers and bet against the low ones. By the end of 2025 it was the largest hedge fund manager in the world. **Why it matters:** AQR got there by selling tax losses. From 2023 it turned its trading methods into accounts designed to let wealthy clients cancel their capital gains taxes, a business that grew from about $3 billion to about $70 billion in three years and that the [[IRS]] and the Senate's leading Democratic tax-writer are now trying to rein in. The strategy has its own page: [[Tax-Aware Long-Short Investing]]. ## From Goldman to Greenwich Asness, Krail and Liew met as graduate students at the University of Chicago, where Asness studied under [[Eugene Fama]], and went on to run the quantitative research group at [[Goldman Sachs]]'s asset management arm. There they built Global Alpha, one of the first large computer-driven hedge funds. In 1998 they left with Kabiller, a Goldman colleague, to start AQR. The name stands for Applied Quantitative Research. The firm moved from New York to Greenwich in 2004. In November of that year Affiliated Managers Group, a publicly traded company that buys stakes in investment firms, bought a minority share; AQR then managed about $12 billion. AMG added to its stake in 2014, when AQR managed about $115 billion. The founders and partners kept a majority both times. ## Boom, slump and a second act AQR lost heavily in the 2008 financial crisis, recovered, and by 2017 was the second-largest hedge fund firm in the world. Then its core approach stopped working. The firm kept buying cheap stocks that kept getting cheaper, staff were cut, and by 2022 its assets had fallen below $100 billion. What rebuilt it was tax. AQR's researchers had been publishing since 2018 on how a portfolio that is both long and short can be managed to harvest losses, and the partners had been running such funds largely with their own money. In 2023 the firm began offering the approach in individual accounts for outside clients. The results, as reported by Bloomberg and Institutional Investor: | Measure | Figure | |---|---| | Assets in long-short tax strategies, 2023 | about $3 billion | | The same, 2026 | about $70 billion | | Growth in total assets during 2025 | a record $65 billion | | Total assets, end of 2025 | $179 billion, more than a third of it in tax-aware funds | | Hedge fund assets, end of March 2026 | more than $140 billion | ## The tax products - **Flex.** Individually managed stock accounts that borrow and sell short so as to produce capital losses while the account grows. A sales presentation described by Bloomberg projected that $100 million in the most aggressive version could, over ten years, roughly triple in value and generate more than $580 million in losses. - **Delphi Plus.** A fund that uses swaps and currency contracts to produce *ordinary* losses, which can be set against wages and business income. It held $6.6 billion at mid-2026 and is the product most closely matched by the techniques described in [[IRS Notice 2026-62]]. AQR says its strategies are built to work within existing rules, and Asness has long argued that managers who ignore taxes shortchange taxable clients. The firm's own marketing material warns that the expected tax benefits could be lost through a change in the law, including a retroactive one, or a successful IRS challenge, in which case penalties may apply. ## Exposure - **Regulators.** Treasury officials called some tax-aware products potentially abusive in July 2026, and the September notice named techniques of the kind Delphi Plus uses. [[Ron Wyden]] has asked the IRS to go after the long-short accounts as well. There is no public indication that the IRS is examining AQR itself. - **Gatekeepers.** Fidelity stopped advisers from placing new client money in long-short managed accounts on its platform in February 2026, and Charles Schwab tightened access in April and June. - **Its outside shareholder.** AMG has told investors it expects AQR to supply more than a fifth of its 2026 earnings. A short seller, Orso Partners, is betting against AMG's shares on the view that the government will curb the strategy. - **Imitators.** A former AQR principal, Hoon Kim, founded Quantinno Capital Management, now the largest rival in the business; Two Sigma and WorldQuant have followed. ## Why it's on the map AQR shows a kind of power this wiki usually tracks through lobbying and campaign money working instead through product design. Nobody had to change the tax code. A firm with enough computing power and legal advice found a combination of existing rules that lets its clients decide how much capital gains tax to pay, and sold it at scale before the government responded. The political money is there too, though it is modest by the standards of the donors mapped elsewhere on this site. On October 6, 2026, eight days after the notice was issued, Asness gave $2 million to the [[Senate Leadership Fund]]'s spending committee, his first contribution to it in the 2026 election cycle. The filing gives AQR as his employer. The two dates are a sequence; no public evidence connects the gift to the notice. See [[Asness 2M to SLF PAC October 2026]]. ## Connections - [[Cliff Asness]] — co-founder and managing principal - [[Tax-Aware Long-Short Investing]] — the strategy behind the firm's growth - [[IRS Notice 2026-62]] — the government's warning - [[Goldman Sachs]] — where the founders worked together - [[Eugene Fama]] — Asness's teacher, whose research the firm's methods build on - [[Bridgewater Associates]] — another of the largest hedge fund managers, and a rival in risk-parity investing - [[Hedge Funds]] · [[Capital Gains Tax]] · [[Buy, Borrow, Die]] - [[Asness 2M to SLF PAC October 2026]] · [[Senate Leadership Fund]]