AgPa #78: Hedge Funds – Man vs. Machine

Man vs. Machine: Comparing Discretionary and Systematic Hedge Fund Performance (2017)
Campbell R. Harvey, Sandy Rattray, Andrew Sinclair, Otto Van Hemert
The Journal of Portfolio Management 43(4), URL/SSRN

This week’s AGNOSTIC Paper examines the ongoing Man vs. Machine question in asset management at the example of hedge funds. The paper is therefore a predecessor to AgPa #21 that examines the same question for AI-powered mutual funds. The authors mention that there are still myths around systematic investing and many investors seem to have some kind of algorithm aversion. This is in-line with my own experiences, so I believe the paper fills an important gap for better education. In addition to that, the authors provide a practical framework to evaluate the performance and risks of hedge funds which I believe goes beyond the question of Man vs. Machine.

  • Macro hedge funds: systematic beat discretionary
  • Equity hedge funds: a draw between systematic and discretionary
  • Systematic and discretionary funds are quite similar
  • Hedge fund investing is more difficult than averages suggest

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