Long short
How Frec and AQR compare
7 min read
What is long short direct indexing?
Long short direct indexing is one of the most tax-efficient investment strategies available to investors. The structure can generate pre-tax alpha through factor tilts and stock selection while also producing capital losses on the long and short side of the portfolio. Capital losses can be used to offset unlimited capital gains. The long short structure creates a near-continuous source of harvestable losses and any excess losses can be carried forward to future tax years.
The difference with Frec
With Frec, there’s no advisor layer between you and your account. You can open an account in minutes, set your strategy, and start investing — all from web or mobile. The minimum for our long short strategies start at $100,000 for the 140/40 and increase to $500,000 for 200/100 and 250/150. You can see our all-in pricing at any time. These numbers cover everything: management, transaction costs, and both post- and pre-tax financing fees. You can access your account, review performance, and make changes at any time via the web or mobile app.
AQR is only available through a financial advisor or RIA. Your advisor negotiates terms with AQR and then layers their own fee on top, so what you pay depends on who you work with. Minimums typically range from $1 to $3 million.
How the strategies work
Frec takes a factor-based approach to pre-tax excess return and puts you in control. You can choose between growth, value, and quality today, and you can change your selection at any time. The portfolio tracks your selected benchmark while expressing that tilt and remaining neutral to other common factor risks. As of March 29th, 2026, our demo account running the 140/40 Russell 1000 with a value tilt has had a pre-tax excess return of 1.26% since its initial investment on September 9th, 2025.1
An investor already concentrated in technology and growth stocks might want a value or quality tilt to balance their broader exposure. A historically conservative investor who wants to start being more aggressive might choose a growth tilt. You can see exactly what you own in real time and adjust as your situation changes.
You can also add, adjust, or exclude individual stocks and sectors and create a “do not short list” for positions you want to hold long in another portfolio. We manage wash sales and constructive sales around your constraints.
Customer portfolios are reviewed daily by a combination of automated monitoring software with oversight from our in-house quantitative researchers and engineers. We rebalanced when it makes the most sense from a risk management and loss harvesting perspective.
AQR’s alpha model is built around human stock selection and runs the same way for every client while taking on meaningful active risk to pursue pre-tax alpha. They describe it to go long positions that will rise in value, short positions that will underperform, and they admit that success relies heavily on the “stock selection ability” of the manager running the strategy. You can’t adjust your factor preferences based on the rest of your portfolio or personal market view which could lead to concentration risk across your broader portfolio, i.e. being heavily overweight in certain areas.
Tax loss harvesting and simulation depth
Frec rebalances twice a week on average, and when strong opportunities arise, our algorithm will trade across consecutive days. AQR rebalances monthly. Because volatile markets are where tax loss harvesting matters most, calendar-based triggers can miss meaningful opportunities.
Frec’s simulations offer broader coverage and more conservative assumptions than AQR’s published research. Our simulations cover 41 scenarios, with quarterly launch dates from April 2005 through March 2015. Each runs for 10 years using data through early 2025. Quarterly launch dates provide a more complete picture of strategy behavior across market environments. We also took a conservative approach to tax loss harvesting estimates by including a maximum of one financial crisis in each simulation.
Based on available data AQR’s research includes 14 simulations with annual start dates from 2000 through 2013 — a period when classic factor alpha hadn’t decayed and contained one of the largest financial crises (2008). Some simulations also contain more than one major drawdown, which is favorable for tax loss harvesting.
Some of AQR’s historical simulations aggressively estimate potential tax loss harvesting performance due to the inclusion of such major drawdowns. Of all actual AQR customer accounts we’ve been able to compare against, Frec has had equal or better tax loss harvesting performance (and we’re happy to run this analysis for anyone considering making the switch!).2
Both sets of simulations have merit; more scenarios and recent data give Frec’s a wider lens, while AQR’s longer history captures a different market regime.
Read more about Frec’s methodology in our white paper. All results are hypothetical, do not reflect actual investment results, and are not a guarantee of future results.
Transitioning between strategies
Because Frec offers both classic direct indexing and long short all within a single account, moving between them is easy and straightforward.
You can leverage up or down at any time. If there comes a point where you no longer need a leveraged strategy, the long side of your portfolio can convert directly into a classic direct index without a full liquidation event. Our deleveraging white paper covers this in depth.
We also have a portfolio allocation tool so you can set up portfolio targets across multiple direct indexing strategies. For example, you can have exposure to the Russell 1000 in a long short index, and international exposure via a classic direct index.
AQR doesn’t offer classic direct indexing products, so transitioning directly from long short back to a long only index requires more coordination. International or other index exposure would need to be managed across separate accounts.
Borrowing and strategic controls
At Frec, you can access liquidity by borrowing against your long short portfolio through our portfolio line of credit, and you can also withdraw from your account at any time. Every withdrawal is handled in the most tax-efficient way possible. Anytime you take an action (e.g. withdrawal, deposit, transition between indices) we will provide an estimated tax impact, projected tracking error, and margin call information, while automatically optimizing for wash sales behind the scenes.
AQR’s Flex SMAs allow you to adjust your active risk as your tolerance and desire for alpha change, but changes need to be coordinated through an advisor.
Who each product is for
Frec is built for investors who want more control: visibility into every position, the ability to choose their factor tilt, set their benchmark, understand exactly what they will pay, and understand their options when they want to exit. AQR may be the right fit for investors who prefer working through an advisor and are comfortable with a more institutional, manager-driven approach.
You can view our live demo account or book a call with one of our team members to get a personalized walkthrough.
More about Frec
Frec is well capitalized, backed by Greylock, and on a clear path to profitability. Our most recent funding round was oversubscribed by existing customers. All customer assets are custodied at Apex Clearing. Brokerage services are provided by Frec Securities LLC, which is a member of SIPC. Securities in your account are protected up to $500k. Please see www.sipc.com. Apex has additional coverage for up to an aggregate of $150m. If anything were to change at Frec, your assets would remain secure and fully portable to another broker.
Want to hear from a real customer? Read this Bloomberg article where David Hauser explains why he chose Frec.
When you’re ready, getting started is easy.
The Long short strategies involve a higher level of risk than traditional long-only investing, including the use of portfolio margin and leverage. Borrowing against these strategies amplifies both potential gains and losses and may result in losses exceeding your initial investment. Information about AQR and its strategies has been obtained from publicly available sources. Frec has not independently verified this information and it may not reflect current offerings, fees, or performance. This comparison was produced by Frec, which has financial interest in its own products. Readers should consider that this has potential bias when evaluating the information presented.
