Form 497K AQR Funds
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AQR Alternative Risk Premia Fund
Fund Summary — May 1, 2022 (as Amended August 19, 2022)
Ticker: Class N/QRPNX — Class I/QRPIX — CLASS R6/QRPRX
Before you invest, you may want to review the Fund’s prospectus, which contains more information about the Fund and its risks. You can find the Fund’s prospectus, reports to shareholders, and other information about the Fund, including the statement of additional information, online at https://funds.aqr.com/fund-documents. You can also get this information at no cost by calling (866) 290-2688 or by sending an email to [email protected]. The Fund’s
prospectus and
statement of additional information, each dated May 1, 2022, as amended and supplemented from time to time, and the Fund’s most recent
shareholder report, dated December 31, 2021, are all incorporated by reference to this summary prospectus.
Investment Objective
The AQR
Alternative Risk Premia Fund (the “Fund”) seeks positive absolute returns.
As
further described under “Details About the AQR Alternative Risk Premia Fund” in the Fund’s prospectus, a "positive absolute return" seeks to earn a positive
total return over a reasonable period of time regardless of market conditions or general market direction.
Fees and Expenses of the Fund
This
table describes the fees and expenses that you may pay if you buy and hold shares of the Fund.
Annual Fund Operating Expenses (expenses that you pay each year as a percentage of the
value of your investment)
| |
Class N |
Class I |
Class R6 |
| Management Fee |
1.20% |
1.20% |
1.20% |
| Distribution (12b-1) Fee |
0.25% |
None |
None |
| Other Expenses |
|
|
|
| Dividends on short sales1 and interest expense |
1.39% |
1.39% |
1.39% |
| All other expenses |
0.51% |
0.50%
|
0.41% |
| Total Other Expenses |
1.90% |
1.89% |
1.80% |
| Acquired Fund Fees and Expenses2
|
0.01% |
0.01% |
0.01% |
| Total Annual Fund Operating Expenses |
3.36% |
3.10% |
3.01% |
| Less: Expense Reimbursements3
|
0.31% |
0.30% |
0.31% |
| Total Annual Fund Operating Expenses after Expense Reimbursements4 |
3.05% |
2.80% |
2.70% |
1 When a cash dividend is declared on a stock the Fund has sold short, the Fund is required to pay an
amount equal to the dividend to the party from which the Fund has borrowed the stock, and to record the payment as an expense.
2 Acquired
Fund Fees and Expenses reflect the expenses incurred indirectly by the Fund as a result of the Fund's investments in underlying money market mutual funds, exchange-traded funds or other pooled investment vehicles.
3 The
Adviser has contractually agreed to reimburse operating expenses of the Fund in an amount
sufficient to limit certain Specified Expenses at no more than 0.20% for Class N Shares and Class I Shares and 0.10% for Class R6 Shares. "Specified Expenses" for this purpose
include all Fund operating expenses other than management fees and 12b-1 fees and exclude interest, taxes, dividends on short sales, borrowing costs, acquired fund fees and expenses, interest expense relating to short sales, expenses related to class action claims, contingent expenses related to tax reclaim receipts and extraordinary expenses. This agreement (the “Expense Limitation Agreement”) will continue at least through April 30, 2023. The Expense Limitation Agreement may be
terminated with the consent of the Board of Trustees, including a majority of the Non-Interested Trustees of the Trust. The Adviser is entitled to recapture any expenses reimbursed during the thirty-six month period following the
end of the month during which the Adviser reimbursed expenses, provided that the amount
recaptured may not cause the Specified Expenses attributable to a share class of the Fund during a year in which a repayment is made to exceed either of (i) the applicable limits in
effect at the time of the reimbursement and (ii) the applicable limits in effect at the time of recapture.
4 Total Annual
Fund Operating Expenses after Expense Reimbursements are 1.66% for Class N Shares, 1.41% for Class I Shares and 1.31% for Class R6 Shares if dividends on short sales and interest
expense are not included.
AQR Funds–Summary Prospectus2
Example: This Example is intended to help you compare the cost of investing in the Fund with
the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in
the Fund for the time periods indicated and then redeem all of your shares at the end of those periods. The Example also assumes that your investment has a 5% return each year and
that the Fund’s operating expenses remain the same and takes into account the effect of the Expense Limitation Agreement through April 30, 2023, as discussed in Footnote No. 3 to the Fee Table. Although your actual costs may be higher or lower,
based on these assumptions your costs would be:
| |
1 Year |
3 Years |
5 Years |
10 Years |
| Class N Shares |
$308 |
$1,004 |
$1,724 |
$3,628 |
| Class I Shares |
$283 |
$929 |
$1,599 |
$3,390 |
| Class R6 Shares |
$273 |
$901 |
$1,555 |
$3,305 |
Portfolio Turnover: The Fund pays transaction costs, such as commissions, when it buys and sells
securities (or “turns over” its portfolio). A higher portfolio turnover may indicate higher transaction costs and may result in higher taxes when shares are held in a taxable account. These costs, which are not reflected in annual fund operating expenses or in the
example, affect the Fund’s performance. During the most recent fiscal year, the Fund’s portfolio turnover rate was 179% of the average value of its
portfolio.
Principal Investment Strategies of the
Fund
The Fund pursues its investment objective by aiming to provide exposure
to five separate investment styles (“Styles”): value, momentum, carry, defensive and trend using both long and short positions within the following asset groups
(“Asset Groups”): stocks, equity indices, bonds, currencies and commodities. The Fund will achieve its exposure to any of the Asset Groups by using derivatives or holding those assets directly. The Fund will also use derivatives for hedging purposes. The
Fund implements the Styles by investing globally, including in both developed and emerging markets, in a broad range of instruments, including, but not limited to, equities (primarily those issued by large- and mid-cap companies), futures
(including index futures, equity futures, interest rate futures, bond futures, commodity futures and currency futures), currency and commodity forwards, and swaps (including equity swaps, bond swaps, interest rate swaps, swaps on index futures, total
return swaps, commodity swaps and swaps on commodity futures) (collectively, the “Instruments”). The Fund may also invest in other registered investment companies including exchange-traded funds (“ETFs”).
The Fund’s exposure to equities includes securities of U.S. and non-U.S. issuers and equity
indices representing the United States and non-U.S. countries, including, with respect to non-U.S. countries, those from both developed and emerging markets. As of the date of this prospectus, the Adviser generally considers large- and mid-cap companies to be those companies with market capitalizations around the range of the
MSCI World Index at the time of purchase. For the bonds Asset Group, the Fund will have exposure to U.S. Government securities and sovereign debt issued by other developed
countries and bond indices representing such securities. The Fund may invest in debt securities of any credit rating, maturity or duration, which may include high-yield or
“junk” bonds. From time to time, the Fund can have significant exposure to non-U.S. dollar denominated currencies, including emerging market currencies.
The Fund is
generally intended to have a low correlation to the equity, bond and credit markets. The Fund also is not designed to match the performance of any hedge fund index. In order to
minimize market impact and reduce trading costs, where applicable, the Fund will utilize a proprietary approach to algorithmic trading. The Adviser will attempt to mitigate risk
through diversification of holdings and through active monitoring of volatility, counterparties and other risk measures. There is no assurance, however, that the Fund will achieve its investment
objective.
The Styles employed by the Fund are:
Value: Value
strategies favor investments that appear cheap over those that appear expensive based on fundamental measures related to price, seeking to capture the tendency for relatively cheap
assets to outperform relatively expensive assets. The Fund will seek to buy assets that are “cheap” and sell those that are “expensive.” Examples of value
measures include using price-to-earnings and price-to-book ratios for selecting stocks.
Momentum: Momentum
strategies favor investments that have performed relatively well over those that have underperformed over the medium-term (i.e., one year or less), seeking to capture the tendency
that an asset’s recent relative performance will continue in the near future. The Fund will seek to buy assets that recently outperformed their peers and sell those that recently underperformed. Examples of momentum measures include simple price momentum for selecting stocks and
price- and yield-based momentum for selecting bonds.
Carry: An asset’s “carry” is its expected return assuming market conditions, including its price, stay the same. Carry strategies favor investments with higher yields over those with lower yields, seeking to capture the tendency for higher-yielding assets to provide higher returns than lower-yielding assets. The Fund will seek to take long positions in high-yielding
assets and short positions in low-yielding assets. An example of carry measures includes selecting currencies and bonds based on interest rates.
Defensive: Defensive strategies favor investments with low-risk characteristics over those with high-risk
characteristics, seeking to capture the tendency for lower risk and higher-quality assets to generate higher risk-adjusted returns than higher risk and lower-quality assets. The Fund will seek to buy low-risk, high-quality assets and sell high-risk, low-quality assets. An example of a defensive measure includes using beta (i.e., an investment’s sensitivity to the securities markets) to select stocks.
AQR Funds–Summary Prospectus3
Trend: Trend
strategies favor investments that follow an identified positive or negative trend. The
Adviser uses a proprietary, systematic and quantitative process that seeks to benefit from price trends in equity index, bond and currency Instruments.
The size and type (long or short) of the position taken will relate to various factors, including the Adviser’s systematic assessment
of a trend and its likelihood of continuing as well as the Adviser’s estimate of the
Instrument’s risk. The Fund may have both long and short positions in different assets depending on their respective price trends. An example of a trend measure is using short-term prices (e.g., prices over a one to three month period) to select an equity index.
The Fund is actively managed and the Fund’s exposures to Styles and Asset Groups will vary based
on the Adviser’s ongoing evaluation of investment opportunities. The Fund expects to maintain exposure to all five Styles; however, not all
Styles are represented within each Asset Group. The Adviser targets balanced-risk weights across both Styles and Asset Groups, which means that lower risk Styles and Asset Groups, as
determined by the Adviser, will generally have higher notional allocations (i.e., greater leverage) than higher risk Styles and Asset Groups, as determined by the
Adviser. Individual
investments are sold or closed out during a rebalancing process, the frequency of which is expected to vary depending on the Adviser’s ongoing evaluation of certain factors including changes in market conditions and how
much the actual portfolio deviates from the target portfolio.
The Adviser will consider the
potential federal income tax impact on a shareholders’ after-tax investment return of certain trading decisions, including but not limited to, selling or closing out of
Instruments to realize losses, or to refrain from selling or closing out of Instruments to avoid realizing gains, when determined by the Adviser to be appropriate. The Adviser will also take into
consideration various tax rules pertaining to holding periods, wash sales and tax straddles.
The Fund’s use of futures contracts, forward contracts, swaps and certain other Instruments will
have the economic effect of financial leverage. Financial leverage magnifies exposure to the swings in prices of an asset class underlying an Instrument and results in increased volatility,
which means the Fund will have the potential for greater gains, as well as the potential for greater losses, than if the Fund did not use Instruments that have a leveraging effect.
For example, if the Adviser seeks to gain enhanced exposure to a specific asset class through an Instrument providing leveraged exposure to the asset class and
that Instrument increases in value, the gain to the Fund will be magnified. If that investment decreases in value, however, the loss to the Fund will be magnified. A decline in the
Fund’s assets due to losses magnified by the Instruments providing leveraged exposure may require the Fund to liquidate portfolio positions to satisfy its obligations or to
meet redemption requests when it may not be advantageous to do so. There is no assurance that the Fund’s use of Instruments providing enhanced exposure will enable the Fund to achieve its investment objective.
The Adviser, on average, will target
an annualized volatility level for the Fund of 8%. Volatility is a statistical measurement of the dispersion of returns of a security or fund or index, as measured by the annualized standard deviation of its returns. The Adviser expects that the Fund’s targeted annualized forecasted volatility will typically range between 6% and 10%; however, the actual or realized volatility
level for longer or shorter periods may be materially higher or lower depending on market conditions. Higher volatility generally indicates higher risk. Actual or realized volatility can and will differ from the forecasted or target volatility described above.
The Fund’s strategy engages in frequent portfolio trading which may result in a higher portfolio
turnover rate than a fund with less frequent trading, and correspondingly greater brokerage commissions and other transactional expenses, which are borne by the Fund, and may have adverse tax consequences.
The Fund intends to make investments through the Subsidiary and may invest up to 25% of its total assets in the Subsidiary. The Subsidiary is a wholly-owned and controlled subsidiary of the Fund, organized under the laws of the Cayman Islands as an exempted
company. Generally, the Subsidiary will invest primarily in commodity futures, commodity
forwards, commodity swaps, swaps on commodity futures and other commodity-linked derivative Instruments but it may also invest in financial futures, option and swap contracts, fixed income securities, pooled investment vehicles, including those that are not
registered pursuant to the 1940 Act, and other investments intended to serve as margin or collateral for the Subsidiary’s derivative positions. The Fund will invest in the Subsidiary in order to gain exposure to the commodities markets within the limitations of the federal tax laws, rules and regulations that apply to registered investment companies. Unlike the Fund, the Subsidiary may invest without limitation in commodity-linked derivative instruments, however, the Fund and
the Subsidiary will comply with Rule 18f-4 on a
consolidated basis with respect to investments in derivatives. In addition, the Fund and the Subsidiary will be subject to the same fundamental investment restrictions on a consolidated basis and, to the extent applicable to
the investment activities of the Subsidiary, the Subsidiary will follow the same compliance policies and procedures as the Fund. Unlike the Fund, the Subsidiary will not seek to qualify as a regulated investment company under Subchapter M of the Code. The Fund is the sole shareholder of the Subsidiary and does not expect shares of the Subsidiary to be
offered or sold to other investors.
A portion of the Fund’s assets will be held in
cash or cash equivalent investments, including, but not limited to, interests in short-term investment funds, short-term bond fund shares, money market fund shares and/or U.S.
Government securities.
Principal Risks of Investing in the
Fund
Risk is inherent in all investing. The value of your investment in the
Fund, as well as the amount of return you receive on your investment, may fluctuate significantly from day to day and over time. You may lose part or all of your investment in the Fund or your investment may not perform as well as other similar
investments. The Fund is not a complete investment program and should be considered only as one part of an investment portfolio. The Fund is more appropriate for
AQR
Funds–Summary Prospectus4
long-term investors who can bear the risk of short-term NAV
fluctuations, which at times, may be significant and rapid, however, all investments long- or short-term are subject to risk of loss. The following is a summary description of certain risks of investing in the Fund. The order of the below risk factors does
not indicate the significance of any particular risk factor.
Below Investment Grade Securities Risk: Although bonds rated below investment grade (also known as
“junk” securities) generally pay higher rates of interest than investment grade bonds, bonds rated below investment grade are high risk, speculative investments that may cause income and principal losses for the Fund.
Commodities Risk: Exposure to the commodities markets may subject the Fund to greater volatility than investments in
traditional securities. The value of commodity-linked derivative investments may be affected by changes in overall market movements, commodity index
volatility, changes in interest rates, or factors affecting a particular industry or
commodity, such as drought, floods, weather, embargoes, tariffs and international economic, political and regulatory developments.
Common Stock Risk:
The Fund may invest in, or have exposure to, common stocks. Common stocks are subject to greater fluctuations in market value than certain other asset classes as a result of such
factors as a company’s business performance, investor perceptions, stock market trends and general economic conditions.
Counterparty Risk:
The Fund may enter into various types of derivative contracts as described below under “Derivatives Risk”. Many of these derivative contracts will be privately
negotiated in the over-the-counter market. These contracts also involve exposure to credit risk, since contract performance depends in part on the financial condition of the
counterparty. If a privately negotiated over-the-counter contract calls for payments by the Fund, the Fund must be prepared to make such payments when due. In addition, if a counterparty’s creditworthiness declines, the Fund may not receive payments owed
under the contract, or such payments may be delayed under such circumstances and the value of agreements with such counterparty can be expected to decline, potentially resulting in losses to the Fund.
Credit Risk: Credit risk refers to the possibility that the issuer of a security or the issuer of the
reference asset of a derivative instrument will not be able to make principal and interest payments when due. Changes in an issuer’s credit rating or the market’s perception of an issuer’s creditworthiness may also affect the value of the Fund’s investment in that issuer. The degree of credit risk depends on both the financial condition of the issuer and the terms of the obligation. Securities rated in the four highest categories (S&P Global Ratings (“S&P”) (AAA, AA, A and BBB), Fitch Ratings (“Fitch”) (AAA, AA, A and BBB) or Moody’s Investors Service, Inc. (“Moody’s”) (Aaa, Aa, A and Baa)) by the rating agencies are considered investment grade but they may also have some speculative characteristics, meaning that they carry more risk than higher rated
securities and may have problems making principal and interest payments in difficult economic climates. Investment grade ratings do not guarantee that the issuer will not default on its payment obligations or that bonds will not otherwise lose value.
Currency Risk:
Currency risk is the risk that changes in currency exchange rates will negatively affect securities denominated in, and/or receiving revenues in, foreign currencies. The liquidity
and trading value of foreign currencies could be affected by global economic factors, such as inflation, interest rate levels, and trade balances among countries, as well as
the actions of sovereign governments and central banks. Adverse changes in currency exchange rates (relative to the U.S. dollar) may erode or reverse any potential gains from the Fund’s investments in securities denominated in a foreign currency or may widen existing losses.
Derivatives Risk: In general, a derivative instrument typically involves leverage, i.e., it provides exposure to potential gain or loss from a change in the level of the market price of the underlying security, currency or commodity (or a basket or index) in a notional amount that exceeds the amount of cash or assets required to establish or maintain the derivative instrument.
Adverse changes in the value or level of the underlying asset or index, which the Fund may not directly own, can result in a loss to the Fund substantially greater than the amount invested in the derivative itself. The use of derivative instruments also exposes the Fund to additional risks and transaction costs. These instruments come in many varieties and have a wide range
of potential risks and rewards, and may include, as further described in the section entitled “Principal Investment Strategies of the Fund,” futures contracts, forward
contracts and swaps. A risk of the Fund’s use of derivatives is that the fluctuations in their values may not correlate perfectly with the overall securities
markets.
Emerging Market Risk: The Fund intends to have exposure to emerging markets. Emerging markets are riskier than more developed markets because
they tend to develop unevenly and may never fully develop. Investments in emerging markets may be considered speculative. Emerging markets are more likely to experience
hyperinflation and currency devaluations, which adversely affect returns to U.S. investors. In addition, many emerging securities markets have far lower trading volumes and less liquidity than developed markets. Emerging markets generally have less stable political systems, less
developed securities settlement procedures and may require the establishment of special custody arrangements. Emerging securities markets generally do not have the level of market efficiency and strict standards in accounting and securities
regulation as developed markets, which could impact the Adviser's ability to evaluate these securities and/or impact Fund performance.
Foreign Investments Risk: Foreign investments often involve special risks not present in U.S. investments that can increase the chances that the Fund
will lose money. These risks include:
•The Fund generally holds its foreign instruments and cash in foreign banks and securities depositories, which may be
recently organized or new to the foreign custody business and may be subject to only limited or no regulatory oversight.
•Changes in foreign currency
exchange rates can affect the value of the Fund’s portfolio.
AQR Funds–Summary Prospectus5
•The economies of certain
foreign markets may not compare favorably with the economy of the United States with respect to such issues as growth of gross national product, reinvestment of capital, resources
and balance of payments position.
•The governments of certain countries may prohibit or impose substantial restrictions on foreign investments in their capital
markets or in certain industries.
•Many foreign governments do not supervise and regulate stock exchanges, brokers and the sale of securities to the same
extent as does the United States and may not have laws to protect investors that are comparable to U.S. securities laws.
•Settlement and clearance
procedures in certain foreign markets may result in delays in payment for or delivery of securities not typically associated with settlement and clearance of U.S.
investments.
•The regulatory, financial
reporting, accounting, recordkeeping and auditing standards of foreign countries may differ, in some cases significantly, from U.S. standards.
Forward and Futures Contract Risk: The successful use of forward and futures contracts draws upon the Adviser’s skill and
experience with respect to such instruments and is subject to special risk considerations. The primary risks associated with the use of forward and futures contracts, which may
adversely affect the Fund’s NAV and total return, are (a) the
imperfect correlation between the change in market value of the instruments held by the Fund and the price of the forward or futures contract; (b) possible lack of a liquid secondary market for a forward or futures contract and the resulting inability to close a forward or futures contract when desired; (c) losses caused by unanticipated market movements, which are
potentially unlimited; (d) the Adviser’s inability to predict correctly the direction of securities prices, interest rates, currency exchange rates and other
economic factors; (e) the possibility that the counterparty will default in the performance of its obligations; and (f) if the Fund has insufficient cash, it may have to
sell securities from its portfolio to meet daily variation margin requirements, and the Fund may have to sell securities at a time when it may be disadvantageous to do
so.
Hedging Transactions Risk: The Adviser from time to
time employs various hedging techniques. The success of the Fund’s hedging strategy will be subject to the Adviser’s ability to correctly assess the degree of correlation between the performance of the instruments used in the hedging strategy and the performance of the investments in the portfolio being
hedged. Since the characteristics of many securities change as markets change or time passes, the success of the Fund’s hedging strategy will also be subject to the Adviser’s ability to continually recalculate, readjust, and execute hedges in an efficient and timely manner. For a variety of
reasons, the Adviser may not seek to establish a perfect correlation between such hedging instruments and the portfolio holdings being hedged. Such imperfect correlation may prevent the Fund from
achieving the intended hedge or expose the Fund to risk of loss. In addition, it is not possible to hedge fully or perfectly against any risk, and hedging entails its own costs (such as trading commissions and fees).
High Portfolio Turnover Risk: The investment techniques and strategies utilized by the Fund, including
investments made on a shorter-term basis or in derivative instruments or instruments with a maturity of one year or less at the time of acquisition, may result in frequent portfolio trading and high portfolio turnover. High portfolio turnover rates will cause the Fund to incur higher levels of brokerage fees and commissions, which may reduce performance, and may cause higher levels of
current tax liability to shareholders in the Fund.
Interest Rate
Risk: Interest rate risk is the risk that prices of fixed income securities generally increase when interest rates decline and decrease when interest rates increase. The Fund may lose money if short-term or long-term interest rates rise
sharply or otherwise change in a manner not anticipated by the Adviser.
Investment in
Other Investment Companies Risk: As with other investments, investments in other investment companies,
including exchange-traded funds (“ETFs”), are subject to market and manager risk. In addition, if the Fund acquires shares of investment companies, shareholders bear both their proportionate share of expenses in the Fund (including management and
advisory fees) and, indirectly, the expenses of the investment companies. The Fund may invest in money market mutual funds. An investment in a money market mutual fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although money market mutual funds that invest in U.S. government securities seek to preserve the value of the Fund’s investment at $1.00 per share, it
is possible to lose money by investing in a stable NAV money market mutual fund. Moreover, prime money market mutual funds are required to use floating NAVs that do not preserve the value
of the Fund’s investment at $1.00 per share.
Leverage Risk: As part of the Fund’s principal investment strategy, the Fund will make investments in
futures contracts, forward contracts, swaps and other derivative instruments. These derivative instruments provide the economic effect of financial leverage by creating additional investment exposure to the underlying instrument, as well as the potential for
greater loss. If the Fund uses leverage through activities such as entering into short sales
or purchasing derivative instruments, the Fund has the risk that losses may exceed the net assets of the Fund. The net asset value of the Fund while employing leverage will be more volatile and sensitive to market
movements.
Manager Risk: If the Adviser makes poor investment
decisions, it will negatively affect the Fund’s investment performance.
Market Risk: Market risk is the risk that the markets on which the Fund’s investments trade will
increase or decrease in value. Prices may fluctuate widely over short or extended periods in response to company, market or economic news. Markets also tend to move in cycles, with periods of rising and falling prices. If there is a general decline in the securities and other markets, your investment in the Fund may lose value, regardless of the individual results of the securities and other
instruments in which the Fund invests.
AQR Funds–Summary Prospectus6
Mid-Cap Securities
Risk: The Fund may invest in, or have exposure to, the securities of mid-cap companies. The prices of
securities of mid-cap companies generally are more volatile than those of large capitalization companies and are more likely to be adversely affected than large-cap companies by changes in earnings results and investor expectations or poor economic
or market conditions, including those experienced during a recession.
Model and Data
Risk: Given the complexity of the investments and strategies of the Fund, the Adviser relies heavily on quantitative models and information and data supplied or made available by third parties (“Models
and Data”). Models and Data are used to construct sets of transactions and investments, to provide risk management insights, and to assist in hedging the Fund’s investments.
When Models and Data prove to be incorrect or incomplete, including because data is stale, missing or
unavailable, any decisions made in reliance thereon expose the Fund to potential risks. Similarly, any hedging based on faulty Models and Data may prove to be unsuccessful. Some of the models used by the Adviser for the Fund are predictive in nature. The use of predictive models has inherent risks. Because predictive models are
usually constructed based on historical data supplied by third parties or otherwise, the success of relying on such models may depend on the accuracy and reliability of the supplied historical data. The Fund bears the risk that the quantitative models used by the Adviser will not be successful in selecting investments or in determining the weighting of investment positions that will enable
the Fund to achieve its investment objective.
All models rely on correct data inputs. If incorrect data is entered into even a well-founded model, the resulting information
will be incorrect. However, even if data is inputted correctly, “model prices” will often differ substantially from market prices, especially for instruments with complex characteristics, such as derivative instruments.
The Fund is unlikely to be successful unless the assumptions underlying the models are realistic and either remain realistic
and relevant in the future or are adjusted to account for changes in the overall market environment. If such assumptions are inaccurate or become inaccurate and are not promptly adjusted, it is likely that profitable trading signals will not be
generated, and major losses may result.
The
Adviser, in its sole discretion, will continue to test, evaluate and add new models, which
may result in the modification of existing models from time to time. There can be no assurance that model modifications will enable the Fund to achieve its investment objective.
Momentum Style Risk: Investing in or having exposure to securities with positive momentum entails investing
in securities that have had above-average recent returns. These securities may be more volatile than a broad cross-section of securities. In addition, there may be periods during which the investment performance of the Fund while using a momentum strategy may
suffer.
Short Sale Risk: The Fund enters into a short sale by selling a security it has borrowed (typically from a broker or other institution). If
the market price of a security increases after the Fund borrows the security, the Fund will suffer a (potentially unlimited) loss when it replaces the borrowed security at the
higher price. In certain cases, purchasing a security to cover a short position can itself cause the price of the security to rise further, thereby exacerbating the loss. In
addition, the Fund may not always be able to borrow the security at a particular time or at an acceptable price. The Fund may also take a short position in a derivative instrument, such as a future, forward or swap. A short position in a derivative instrument involves the risk of a theoretically unlimited increase in the value of the underlying instrument, which could cause the Fund to suffer a
(potentially unlimited) loss. Short sales also involve transaction and financing costs that will reduce potential Fund gains and increase potential Fund losses.
Sovereign Debt Risk: The Fund may invest in, or have exposure to, sovereign debt instruments. These
investments are subject to the risk that a governmental entity may delay or refuse to pay interest or repay principal on its sovereign debt, due, for example, to cash flow problems, insufficient foreign currency reserves, political considerations, the relative size of the governmental entity’s debt position in relation to the economy or the failure to put in place economic reforms required by the International Monetary Fund or other multilateral agencies. If a governmental entity defaults, it may ask for more time in
which to pay or for further loans. There is no legal process for collecting sovereign debt that a government does not pay nor are there bankruptcy proceedings through which all or part of the sovereign debt that a governmental entity has not repaid
may be collected.
Subsidiary Risk: By investing in the Subsidiary, the Fund is indirectly exposed to the risks associated with the Subsidiary’s
investments. The commodity-related instruments held by the Subsidiary are generally similar to those that are permitted to be held by the Fund and are subject to the same risks that apply to
similar investments if held directly by the Fund. These risks are described elsewhere in this prospectus. There can be no assurance that the investment objective of the Subsidiary will be
achieved. The Subsidiary is not registered under the 1940 Act, and, unless otherwise noted in this prospectus, is not subject to all the investor protections of the 1940 Act. However, the Fund wholly owns and controls the Subsidiary, and the Fund and the
Subsidiary are both managed by the Adviser, making it unlikely that the Subsidiary will take action contrary to
the interests of the Fund and its shareholders. The Board of Trustees has oversight responsibility for the investment activities of the Fund, including its investment in the Subsidiary, and the Fund’s role as sole shareholder of the Subsidiary. The Fund and the Subsidiary will be subject to the same investment restrictions and limitations on a consolidated basis,
and to the extent applicable to the investment activities of the Subsidiary, the Subsidiary will follow the same
compliance policies and procedures as the Fund. Unlike the Fund, the Subsidiary will not seek to qualify as a regulated investment company under Subchapter M of the Code. Changes in the laws of the United States and/or the Cayman Islands could result in the inability
of the Fund and/or the Subsidiary to operate as described in this prospectus and the SAI and could adversely affect the Fund.
AQR
Funds–Summary Prospectus7
Swap Agreements Risk:
Swap agreements involve the risk that the party with whom the Fund has entered into the swap will default on its obligation to pay the Fund. Additionally, certain unexpected market
events or significant adverse market movements could result in the Fund not holding enough assets to be able to meet its obligations under the agreement. Such occurrences may negatively impact the Fund’s ability to implement its principal investment strategies and could result in losses to the Fund.
Tax-Managed Investment Risk: The performance of the Fund may deviate from that of non-tax managed funds and may not provide as high a return before
consideration of federal income tax consequences as non-tax managed funds. The Fund’s tax-sensitive investment strategy involves active management with the intent of
minimizing the amount of realized gains from the sale of securities; however, market conditions may limit the Fund’s ability to execute such strategy. The Fund’s ability to utilize various tax-management techniques may be curtailed or eliminated in the future by tax legislation or regulation. Although the Fund expects that a smaller portion of its total return will consist of taxable distributions to shareholders as compared to non-tax managed funds, there can be no assurance about
the size of taxable distributions to shareholders.
Distributions of ordinary income to shareholders may be reduced by investing in lower-yielding
securities and/or stocks that pay dividends that would qualify for favorable federal tax treatment provided certain holding periods and other conditions are satisfied by the Fund. The Fund may invest a portion of its assets in stocks and other securities that generate income
taxable at ordinary income rates.
Tax Risk: In order for the Fund to qualify as a regulated investment company under Subchapter M of the
Code, the Fund must
derive at least 90 percent of its gross income each taxable year from qualifying income, which is described in more detail in the SAI. Income from certain commodity-linked
derivative instruments in which the Fund invests is not considered qualifying income. The Fund will therefore restrict its income from direct investments in commodity-linked
derivative instruments that do not generate qualifying income, such as commodity-linked swaps, to a maximum of 10 percent of its gross income.
The Fund’s
investment in the Subsidiary is expected to provide the Fund with exposure to the commodities
markets within the limitations of the federal tax requirements of Subchapter M. Changes in the laws of the United States and/or the Cayman Islands could result in the inability of the Fund and/or the Subsidiary to operate as described in this prospectus and the SAI and could adversely affect the Fund. For example, the Cayman Islands
does not currently impose any income, corporate or capital gains tax, estate duty, inheritance tax, gift tax or withholding tax on the Subsidiary. If Cayman Islands law changes such that the Subsidiary must pay
Cayman Islands taxes, Fund shareholders would likely suffer decreased investment returns.
U.S. Government Securities Risk: Treasury obligations may differ in their interest rates, maturities, times of issuance and other characteristics.
Obligations of U.S. Government agencies and authorities are supported by varying degrees of credit but generally are not backed by the full faith and credit of the U.S. Government.
No assurance can be given that the U.S. Government will provide financial support to its agencies and authorities if it is not obligated by law to do so. Certain of the government agency securities the Fund may purchase are backed only by the credit of the government agency and not by
full faith and credit of the United States.
Value Style Risk: Investing in or having exposure to “value” securities presents the risk that the securities may never reach
what the Adviser
believes are their full market values, either because the market fails to recognize what the
Adviser considers to be the security’s true value or because the Adviser misjudged that value. In addition, there may be periods during which the investment performance of the Fund while using a value strategy may suffer.
Volatility Risk: The Fund may have investments that appreciate or decrease significantly in value over
short periods of time. This may cause the Fund’s net asset value per share to experience significant increases or declines in value over short periods of time, however, all investments long- or short-term are subject to risk of loss.
Performance Information
The performance information below shows summary performance information for the Fund in a bar chart and an average annual total returns table. The
information shows you how the Fund’s performance has varied year by year and provides some indication of the risks of investing in the Fund.
The Fund’s past performance (before and after taxes), as provided by the bar
chart and performance table that follows, is not an indication of future results. Updated
information on the Fund’s performance, including its current NAV
per share, can be obtained by visiting https://funds.aqr.com.
Class I
Shares—Total Returns
The bar chart below provides an illustration of how the
Fund’s performance has varied in each of the indicated calendar years.
AQR Funds–Summary Prospectus8
| Highest Quarterly Return |
Lowest Quarterly Return | ||
| 8.85% |
3/31/21 |
-8.45% |
6/30/20 |
Average Annual Total Returns as of December 31, 2021
The following table compares the Fund’s average annual total returns for Class I Shares, Class N Shares and Class R6 Shares for the periods ended December 31, 2021 to the ICE BofAML US 3-Month Treasury Bill Index. You cannot invest directly in an index. The table includes all applicable fees and sales charges.
| |
One
Year |
Since
Inception |
Share Class
Inception
Date |
| AQR Alternative Risk Premia Fund—Class I |
|
|
|
| Return Before Taxes |
14.25% |
-4.79% |
09/19/2017 |
| Return After Taxes on Distributions |
13.13% |
-5.16% |
|
| Return After Taxes on Distributions and Sale of Fund Shares |
9.14% |
-3.60% |
|
| AQR Alternative Risk Premia Fund—Class N |
|
|
|
| Return Before Taxes |
14.03% |
-4.99% |
09/19/2017 |
| AQR Alternative Risk Premia Fund—Class R6 |
|
|
|
| Return Before Taxes |
14.31% |
-4.68% |
09/19/2017 |
| ICE BofAML US 3-Month Treasury Bill Index (reflects no
deductions for fees, expenses or taxes) |
0.05% |
1.21% |
|
After-tax returns are calculated using the historical highest individual marginal tax rates and do not
reflect the impact of state and local taxes. In some cases, the return after taxes on distributions and sale of
Fund shares may exceed the return before taxes and the return after taxes on distributions due to an assumed benefit from any losses on a sale of Fund shares at the end of the measurement period. Actual after-tax returns depend on an investor’s tax situation and may differ from
those shown, and after-tax returns are not relevant to investors who hold their Fund shares through tax-deferred arrangements such as 401(k) plans or individual retirement accounts. After-tax returns are for Class I Shares only. After-tax
returns for other classes will vary.
Investment Manager
The Fund’s investment manager is AQR Capital Management, LLC.
Portfolio Managers
| Name |
Portfolio Manager
of the Fund Since |
Title |
| Jordan Brooks, Ph.D., M.A. |
January 1, 2022 |
Principal of the Adviser |
| Andrea Frazzini, Ph.D., M.S. |
August 31, 2022 |
Principal of the Adviser |
| John J. Huss |
August 31, 2022 |
Principal of the Adviser |
| Yao Hua Ooi |
September 19, 2017 |
Principal of the Adviser |
| Nathan Sosner, Ph.D. |
May 1, 2019 |
Principal of the Adviser |
| Ashwin Thapar |
January 1, 2022 |
Principal of the Adviser |
Important Additional Information
Purchase and Sale of Fund Shares
You may purchase or redeem Class N Shares, Class I Shares and Class R6 Shares of the Fund, as
applicable, each day the NYSE is open. To purchase or redeem shares you should contact your
financial intermediary, or, if you hold your shares through the Fund, you should contact the Fund by phone at (866) 290-2688 or by mail (c/o AQR Funds, P.O. Box 2248, Denver, CO 80201-2248). The Fund’s initial and subsequent investment minimums for Class N Shares, Class I Shares and
Class R6 Shares, as applicable, generally are as follows.
AQR
Funds–Summary Prospectus9
| |
Class N Shares |
Class I Shares |
Class R6 Shares |
| Minimum Initial Investment |
$1,000,0001
|
$5,000,0001
|
$50,000,0001 |
| Minimum Subsequent Investment |
None |
None |
None |
1 Reductions apply to certain eligibility groups. See “Investing With the AQR Funds” in the
Fund’s prospectus.
Tax Information
The Fund’s dividends and distributions may be subject to federal income taxes and may be taxed as ordinary income or
capital gains, unless you are a tax-exempt investor or are investing through a retirement plan, in which case you may be subject to federal income tax upon withdrawal from such tax deferred arrangements.
Payments to Broker/Dealers and other Financial Intermediaries
If you purchase shares of the Fund through a broker-dealer or other financial intermediary, the Fund
and/or the Adviser or its
affiliates may pay the intermediary for the sale of Fund shares and other services. These payments may create a conflict of interest by influencing the broker-dealer or other financial intermediary and your individual financial professional to
recommend the Fund over another investment. Ask your individual financial professional or visit your financial intermediary’s website for more information.
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