HUMAN TRADERS ARE TROUNCING THE MACHINES The contemporary low volatility trading environment has been kind to actively managed equity funds – particularly if they piled into large-cap momentum stocks like Facebook and Amazon, which have been responsible for the bulk of this year’s rally. But while active managers have enjoyed three quarters of strong returns, quant funds – purportedly the future of asset management, according to many an “expert” on Wall Street – are falling further and further behind. As Bloombergreports, during the first nine months of 2017, the average equity fund was up 9.7 percent while quant funds rose only 0.6 percent, according to data from Hedge Fund Research. https://www.marketarmor.com/2017/10/10/human-traders-are-trouncing-the-machines/
This is dumb -- comparing long β equity funds with neutral β quant funds. Of course β 'works' in an up year for S&P.
Well the thing is investors do care about a traders or a funds performance and they do compare them. I don't think quants would declare in their prospectus " does not work in bull markets", doesn't math work all the time?, or maybe they forget to include bull market conditions into their formulas - rookies!
Humans vs machines in trading; this story kind of reminds me of The Tortoise and the Hare Great human traders will easily surpass the scalping, low volatility relatively safe machines. But of course, like everything in life, there's usually two sides to the coin to consider...or a double-edged knife. I sound like a broken record...but trading is part art, part science -- and no machine or computer can never most likely grasp and excel at that concept. Humans, and the human mind, and emotions are incredibly complex. Both in relation to the market and general life. We don't just simply act accordingly to good or bad stimuli as we necessarily are expected or should.
You are right but remember the quant is a fund marketing itself. It needs to differentiate at least from a marketing stand point in order to charge 2 and 20. Worry about the results later.
Most institutional investors tare looking for two things - interesting correlation profile combined with a statistically-significant positive expectation. I.e. it's ok to have drawdowns, but not when everyone else has drawdowns and it's OK to lose money as long as it does not look like "you're done".
I know - It was just pay back time for all the jabs made by quants/algos new to trading with a real pompous attitude thinking it would be a walk in the park to outgun the discretionary traders forged from years to decades of dog fighting in real trading. Besides, the Princeton geeks were doing this before most of these quants were born and will tell you its nothing new and will be a long hard road to get & maintain good performance.