Aqr Ucits Funds
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AQR UCITS FUNDS Société d’Investissement à Capital Variable Audited Annual Report for the year ended 31 March 2017 R.C.S. Luxembourg: B 165881 No subscription can be received on the sole basis of the present report. Subscriptions are only valid if made on the sole basis of the current Full Prospectus supplemented by the application form, the Key Investor Information Documents (ЉKIIDЉ), the latest semi-annual report and the latest annual report if published hereafter. AQR UCITS FUNDS Table of Contents General Information 2 Investment Management Report (Unaudited) 4 Audit Report 9 Schedule of investments • AQR Emerging Equities UCITS Fund 11 • AQR Global Core Equity UCITS Fund 17 • AQR Global Defensive Equity UCITS Fund 23 • AQR Global Enhanced Equity UCITS Fund 30 • AQR Global Risk Parity UCITS Fund 37 • AQR Managed Futures UCITS Fund 41 • AQR Style Premia: Equity Market Neutral UCITS Fund 47 • AQR Style Premia: High Yield Credit UCITS Fund 68 • AQR Style Premia UCITS Fund 71 • AQR Systematic Total Return UCITS Fund 94 Statements of Assets and Liabilities 121 Statements of Operations 123 Statements of Changes in Net Assets 125 Statements of Changes in Shares Outstanding 127 Statistical Information 129 Notes to the Financial Statements 134 Additional Information for Shareholders (Unaudited) 167 Additional Information for Shareholders Domiciled in Switzerland (Unaudited) 173 AQR UCITS FUNDS General Information Board of Directors In Luxembourg Chairman Arendt & Medernach S.A Antonio Thomas 41A, avenue J.F. Kennedy Independent Non-Executive Director L-2082 Luxembourg Luxembourg Members Andrew Bastow Management Company Executive Director FundRock Management Company S.A. 33, rue de Gasperich Brendan Kalb L-5826 Hesperange Executive Director Luxembourg Thomas Nummer Independent Non-Executive Director Conducting Persons of the Management Company Administrator, Transfer Agent, Domiciliary Romain Denis and Paying Agent Director - IT Projects & Data Management (Since 14 October 2016) HedgeServ (Luxembourg) S.à r.l. 2c rue Albert Borschette Christophe Douche L-1246 Luxembourg Director - Risks and Operations Luxembourg Gudrun Goebel Custodian and Depositary Executive Director - Network & Client Relationships J.P. Morgan Bank Luxembourg S.A. Gregory Nicolas European Bank & Business Centre Director - Legal, Compliance & Corporate 6C, route de Treves (Since 1 September 2016) L-2633 Senningerberg Luxembourg Ross Thomson Director - Operations Oversight Security Lending Agent (Until 1 September 2016) J.P. Morgan Chase Bank N.A. Revel Justin Wood 25 Bank Street Executive Director - Chief Executive Officer Canary Wharf London E14 5JP Aline Zanette United Kingdom Director - US Market (Until 16 August 2016) Auditor PricewaterhouseCoopers, Société coopérative Investment Manager and Distributor 2, rue Gerhard Mercator AQR Capital Management, LLC BP 1443 Two Greenwich Plaza L-1014 Luxembourg Greenwich Connecticut, 06830 Luxembourg USA Legal Advisers Sub-Investment Manager In England UBS Global Asset Management (Americas) Inc. One North Wacker Drive Simmons & Simmons LLP Chicago, IL 60606 CityPoint USA One Ropemaker Street London EC2Y 9SS United Kingdom 2 AQR UCITS FUNDS General Information (continued) Representative in Switzerland Paying Agent in Switzerland Carnegie Fund Services S.A. Banque Cantonale de Genève 11, rue du Général-Dufour 17, quai de l’lle CH-1204 Geneva CH-1204 Geneva Switzerland Switzerland Paying Agent in Austria Societe Generale Prinz Eugen Strasse 8 10/5/Top 11 Vienna, 1040 Austria Paying Agent in Belgium Societe Generale Private Banking NV Kortrijksesteenweg 302 Gent, 9000 Belgium Paying Agent in France State Street Banque SA Immeuble Défense Plaza 23-25 Rue Delarivière-Lefoullon Paris La Défense Cedex, 92064 France Paying Agent in Germany Marcard Stein & Company Ballindamm, 36 Hamburg, 20095 Germany Paying Agent in Spain Simmons and Simmons LLP Calle Miguel Ángel 11 28010, Madrid Spain Paying Agent in Sweden Skandinaviska Enskilda Banken AB Kungstradgardsgatan SE-106 40 Stockholm Sweden Paying Agent in the United Kingdom AQR Capital Management (Europe) LLP 20-22 Bedford Row London WC1R 4JS United Kingdom 3 AQR UCITS FUNDS Investment Management Report (Unaudited) AQR Emerging Equities UCITS Fund The AQR Emerging Equities UCITS Fund’s (the ЉSub-FundЉ) investment objective is to add value by employing a disciplined approach emphasizing both bottom-up security selection and top-down country and currency allocation. The Sub-Fund attempts to achieve its investment objective by underweighting and overweighting securities, industries/sectors, countries and currencies relative its benchmark, the MSCI Emerging Markets Total Return Index with Net Dividends Unhedged (the “Benchmark”). For the year ended 31 March 2017, the Sub-Fund’s Class A2 shares returned 18.5%. The Class A2 shares are denominated in the U.S. dollar, which is also the reference currency of the Sub-Fund. A U.S. dollar denominated investment in the Benchmark would have returned 17.22% for the year ended 31 March 2017, resulting in a relative outperformance by the Sub-Fund. The Sub-Fund’s outperformance was driven primarily by currency selection and country selection. Specifically within the stock selection strategy, stock selection within China was the largest contributor to positive returns. Stock selection within the telecommunication services sector also contributed to the outperformance. As of 31 March 2017, the Sub-Fund’s largest active positions within the stock selection strategy include sector overweights to information technology and materials; the Sub-Fund is underweight consumer discretionary and industrials. Notable active positions also include country overweights to Taiwan and South Korea, with country underweights to Qatar and the United Arab Emirates. There have been no material changes to the Sub-Fund’s investment strategy or objectives during the year ended 31 March 2017. AQR Global Core Equity UCITS Fund The AQR Global Core Equity UCITS Fund’s (the ЉSub-FundЉ) investment objective is long term capital appreciation which it seeks to obtain through investments in equities or equity-related securities of attractively valued companies with positive momentum and a stable business model. In assessing positive momentum, the Sub-Fund favors securities with strong medium-term performance relative to other securities based on the internal screening process. Further, the Sub-Fund favors stable companies in good business health, including those with strong profitability and stable earnings. The Sub-Fund generally invests in companies with market capitalization within the range of the MSCI World Total Return Index, (Net), U.S. dollar unhedged (the “Benchmark”) at the time of purchase. For the year ended 31 March 2017, the Sub-Fund’s Class B3 shares returned 19.70%. Class B3 shares are denominated in Euros and are not hedged against the U.S. dollar, and are therefore exposed to fluctuations in the exchange rate of the Euro to the U.S. dollar, which is the reference currency of the Sub-Fund. A Euro denominated investment in the Benchmark would have returned 22.28% for the year ended 31 March 2017. A U.S. dollar denominated investment in the Benchmark would have returned 14.77% for the year ended 31 March 2017. The Sub-Fund’s underperformance was driven primarily by stock selection within sectors and within countries. Specifically, within the stock selection strategy, stock selection within the United States and within consumer discretionary sector contributed to negative returns. The Sub-Fund’s performance was positively impacted by stock selection within information technology sector. As of 31 March 2017, the Sub-Fund’s largest active positions within the stock selection strategy include sector overweight to information technology and consumer discretionary; the Sub-Fund is underweight energy and consumer staples. Notable active positions also include a country overweight to Germany, as well as a country underweight to Australia. There have been no material changes to the Sub-Fund’s investment strategy or objectives during the year ended 31 March 2017. 4 AQR UCITS FUNDS Investment Management Report (Unaudited) AQR Global Defensive Equity UCITS Fund The AQR Global Defensive Equity UCITS Fund’s (the ЉSub-FundЉ) investment objective is to seek total return. The Sub-Fund pursues a “defensive” strategy, seeking to provide downside protection with upside potential through active stock selection, risk management and diversification. To pursue this investment objective, risk management and absolute return/absolute risk-based portfolio construction techniques are used in an attempt to achieve risk diversification across names, industries and countries, combined with active stock selection focusing on high quality companies. For the year ended 31 March 2017, the Sub-Fund’s Class B3 shares returned 16.17%. Class B3 shares are denominated in Euros and are not hedged against the U.S. dollar, which is the reference currency of the Sub-Fund, and are therefore exposed to fluctuations in the exchange rate of the Euro to the U.S. dollar. The Sub-Fund’s underperformance was driven primarily by stock selection within countries and sector selection. Specifically within the stock selection strategy, stock selection within the United States contributed to negative returns. The Sub-Fund’s performance was positively impacted by stock selection within the health care sector. As of 31 March 2017, the Sub- Fund’s largest active positions within the stock selection strategy include sector