Man vs. Machine: Comparing Discretionary and Systematic Hedge Fund Performance

We analyse and contrast the performance of discretionary and systematic hedge funds. Systematic funds use strategies that are rules-based, with little or no daily intervention by humans. In our experience, some large allocators shy away from systematic hedge funds altogether. A possible explanation for this is what the psychology literature calls “algorithm aversion”. We find that, for the period 1996-2014, systematic equity managers...