AQR hedging its bets with big mutual fund plan

By Joseph A. Giannone

NEW YORK (Reuters) - AQR Capital Management LLC, among the world's largest hedge fund managers, will introduce another hedge fund-style mutual fund next month, as it expands its reach beyond the biggest investors.

Greenwich, Connecticut-based AQR, a $20 billion firm led by former Goldman Sachs Group Inc (GS.N) star Cliff Asness, led a new wave of hedge funds marketing to the masses when it launched the AQR Diversified Arbitrage Fund ADAIX.O in January.

"We, in about two weeks, expect to introduce a whole new series of style exposures for retail investors," AQR co-founder David Kabiller told Reuters in a rare interview.

Long available only to the ultra rich, "alternative" investments are increasingly being sold to small investors with as little as $5,000 on hand. Highbridge Capital Management, a unit of JPMorgan Chase & Co (JPM.N), led the way in 1995, while Legg Mason Inc's (LM.N) Permal Group hedge fund unit rolled out the Tactical Allocation Fund LPTAX.O in April.

John Rekenthaler, vice president of research and new product development at Morningstar, said about $100 billion was invested in hedge style mutual funds. He expects the number of such offerings to double over the next two years.

AQR is the most ambitious hedge fund firm in this regard. Kabiller said AQR plans over time to offer a series of funds it hopes are innovative and unique in the crowded field.

AQR wants to be regarded as the Vanguard of hedge funds, an advocate of lower cost, better managed portfolios in an industry where hedge funds are secretive, charge high fees and do not always deliver the returns they promise.

"We don't want to be theoretical academics. We want to be the guys who demystify alternative (investments) and tell people what's under the wizard's hat," Kabiller said.