Investment Objective

Seeks long-term absolute (positive) returns

General Nature of Fund

Invests using “alternative investment” strategies such as merger arbitrage, convertible arbitrage,
and other forms of arbitrage

Fund Benchmark

Merrill Lynch 3 Month Treasury Bill Index

Investment Approach

The Fund invests in a combination of arbitrage strategies such as merger arbitrage, convertible arbitrage,
and other forms of arbitrage.

Merger Arbitrage: This strategy consists of buying shares of the target company in a proposed merger,
and fully or partially hedging the exposure to the acquirer by shorting the stock of the acquiring company
or other means.

Convertible Arbitrage: This strategy consists of buying convertible securities and attempting to mitigate
the various risks associated with this investment by using a variety of techniques such as shorting the
stock of the issuer.

Other forms of arbitrage include: “when-issued trading”, “stub-trading”, “dual-class arbitrage”, price pressure 
and SPACs (special purpose acquisition companies).


December 2009
Fact Sheet

The Merrill Lynch 3 Month Treasury Bill Index is designed to measure the performance of high-quality short-term cash-equivalent investments. Indexes are unmanaged and one cannot invest directly in an index.

 

 



Diversified Arbitrage Fund

This Fund has the risk that the anticipated arbitrage opportunities do not play out as planned, resulting in potentially reduced returns or losses to the Fund as it unwinds its trades. This fund enters into a short sale by selling a security it has borrowed. 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. Short sales also involve transaction and other costs that will reduce potential Fund gains and increase potential Fund losses. The Fund uses derivatives to hedge certain economic exposures. The use of derivatives exposes the Fund to additional risks including increased volatility, lack of liquidity, and possible losses greater than the Fund's initial investment as well as increased transaction costs.

 


All AQR Funds. An investment in any of the AQR Funds involves risk, including loss of principal. The value of the Funds’ portfolio holdings may fluctuate in response to events specific to the companies in which the Fund invests, as well as economic, political or social events in the United States or abroad. Please refer to the prospectus for complete information regarding all risks associated with the Funds.

An investor considering the Funds should be able to tolerate potentially wide price fluctuations. The Funds are subject to high portfolio turnover risk as a result of frequent trading, and thus, will incur a higher level of brokerage fees and commissions, and cause a higher level of tax liability to shareholders in the Funds. The Funds may attempt to increase its income or total return through the use of securities lending, and they may be subject to the possibility of additional loss as a result of this investment technique.