Investment Strategy
The Fund pursues a "defensive" investment style, seeking to provide downside protection with upside potential through active stock selection, risk management and diversification. The Fund pursues its objective by investing, under normal market conditions, at least 80% of its net assets (including any borrowings for investment purposes) in equity instruments of large-cap issuers. Equity instruments include common stock, preferred stock, warrants, exchange-traded funds that invest in equity securities, stock index futures, real estate investment trusts and other derivative instruments where the reference asset is an equity security. As of March 15, 2021, AQR generally considers large-cap issuers to be those issuers with market capitalizations within the range of the Russell 1000® Index at the time of purchase. The Fund can invest in companies of any size and may invest in small- and mid-cap companies from time to time in the discretion of AQR.
There is no guarantee that the Fund’s objective will be met. The Fund pursues a defensive investment style, meaning it seeks to participate in rising equity markets while mitigating downside risk in declining markets. In other words, the Fund expects to lag the performance of traditional U.S. equity funds when equity markets are rising, but to exceed the performance of traditional U.S. equity funds during equity market declines. To achieve this result, the Fund will be broadly diversified across companies and industries and will invest in companies that AQR has identified to have low measures of risk and high quality (e.g., stable companies in good business health). AQR believes that the stocks of these types of companies may tend to be lower "beta" stocks and that lower "beta" stocks generally are less volatile than higher "beta" stocks (that is, their value has a lower sensitivity to fluctuations in the securities markets). AQR expects low "beta" and high quality stocks to produce higher risk-adjusted returns over a full market cycle than high "beta" or poor quality stocks.
The Fund is actively managed and AQR will vary the Fund's exposures to issuers and industries based on the AQR's evaluation of investment opportunities. In constructing the portfolio, the AQR uses quantitative models, which combine active management to identify quality companies and statistical measures of risk to assure diversification by issuer and industry, as well as additional criteria that form part of AQR's security selection process. AQR will use volatility and correlation forecasting and portfolio construction methodologies to manage the Fund. AQR utilizes quantitative risk models in furtherance of the Fund's investment objective, which seek to control portfolio level risk. Shifts in allocations among issuers and industries will be determined using the quantitative models based on the AQR's determinations of risk and quality, as well as other factors including, but not limited to, managing industry and sector exposures. The Fund bears the risk that the quantitative models used by the portfolio managers will not be successful in forecasting market returns or in determining the weighting of investment positions that will enable the Fund to achieve its investment objective. In managing the Fund's portfolio, AQR may from time to time utilize certain tax management techniques which consider the potential impact of federal income tax on shareholders’ investment return.
The Fund invests significantly in common stocks. The Fund may also invest in or use financial futures contracts as well as exchange-traded funds and similar pooled investment vehicles for hedging purposes, to gain exposure to the equity market and to maintain liquidity to pay for redemptions. The Fund may invest in short-term instruments, including U.S. Government securities, bank certificates of deposit, money market instruments or Funds, and such other liquid investments deemed appropriate by AQR. The Fund may invest in these securities without limit for temporary defensive purposes.
There is no assurance that the Fund's use of equity instruments providing enhanced exposure will enable the Fund to achieve its investment objective. In addition, to attempt to increase its income or total return, the Fund may lend its portfolio securities to certain types of eligible borrowers.
AQR utilizes portfolio optimization techniques to determine trading activity, taking into account anticipated transaction costs associated with trading each equity instrument. The Fund employs sophisticated proprietary trading techniques in an effort to mitigate trading costs and execution impact on the Fund.
Investment Risks
The Fund is subject to Common Stock Risk, Counterparty Risk, Derivatives Risk, Futures Contract Risk, Hedging Transactions Risk, Investment in Other Investment Companies Risk, Manager Risk, Market Risk, Mid-Cap Securities Risk, Model and Data Risk, Securities Lending Risk, Small-Cap Securities Risk. These risks are discussed under AQR Investment Risks per the Disclosure Booklet.
