New paper claims humans required to manage hedge funds
Oct 7th, 2007 | Filed under: Alternative Beta & Hedge Fund Replication, Hedge Fund Industry TrendsWith all the talk of automated hedge fund replication and hedge fund “cloning” these days, it’s easy to discount the role of that apparently antiquated technology, the human being, in hedge fund management.
Now Jonathan Treussard of Boston University claims that while robotic algorithmic trading is a critical element of any hedge fund replication technique, “it may come at a high price in terms of adaptivity, dynamic flexibility and risk selection“.
Jut don’t let the robot union find out that human fund managers might be coming back for their jobs!
Human capital is, of course, the scarce resource underlying most hedge fund strategies. And exceptions to this rule are generally the ones most scared of the concept of hedge fund replication. Treussard argues that human capital, not investment strategy per se is the reason for “the industry’s remarkably high remuneration structure“.
Previous studies such as this one cited by Treussard have also suggested that there is a certain je ne sais quoi in high alpha-producing hedge funds that can be attributed to human ingenuity.
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