Cliff Asness spent roughly three decades bothered by a math problem. Rich investors were losing more money to taxes than their stock pickers were making them. His answer was a fund that manufactures losses on purpose.
That strategy turned AQR Capital Management into the world's largest hedge fund by the end of 2025, surpassing $140 billion in assets by the end of March, according to Bloomberg's Big Take reporting published August 3, 2026, as cited by Yahoo Finance.
Asness first encountered the core insight in 1993, one year into his career at Goldman Sachs. He read a financial journal article co-authored by Rob Arnott arguing that investors typically lose more money to taxes than they gain from beating the market. The idea stayed with him.
His credentials were strong enough to do something about it. Asness earned a doctorate at the University of Chicago Booth School of Business under Nobel Prize winner Eugene Fama, then built Goldman's quantitative research desk before leaving to launch AQR ahead of the firm's late-1990s IPO. He is now 59, sits atop a $4 billion fortune according to the Bloomberg Billionaires Index, and is described as a comic-book collector with Captain America's shield tattooed on his arm.
The road was not straight. AQR thrived until the 2008 financial crisis, then rebuilt, and by 2017 ranked as the world's second-biggest hedge fund firm. Then the strategy broke down. Asness kept buying cheap stocks that kept getting cheaper. He called the market irrational. Clients called their lawyers. AQR cut staff and total assets tumbled below $100 billion by 2022.
The recovery came through what became known as the Flex strategy. According to the Yahoo Finance report, AQR's Flex strategy turns a $100 million investment into more than $580 million of tax-offsetting losses over ten years through the use of shorts and leverage. The approach essentially generates paper losses that wealthy clients can use to offset gains elsewhere in their portfolios.
The strategy has attracted regulatory attention. Charles Schwab and Fidelity are now limiting new accounts in similar products after Treasury officials warned that the strategy produces outcomes Congress never intended. The scrutiny has not yet slowed AQR's growth, but it signals that Washington is paying attention to how far the tax-loss manufacturing approach can be pushed.
