Everyone from telephone salespeople to therapists are worried about artificial intelligence taking their jobs but man has triumphed over machines in the world of hedge funds.
Funds run by individual managers outperformed their computer-driven rivals last year in a sign that stockpickers still have the edge over the robot traders.
Single-manager funds made a return of over 4pc for 2023, versus just 1pc for quantitative funds run by algorithms, according to figures from data provider HFR.
HFR compared a broad range of single-manager hedge funds with at least $50m (£39m) to invest with an index of quant funds. It found individuals consistently beat the robots.
Quant funds work by using vast quantities of data to spot patterns and exploit them with complex mathematical models.
Such black-box funds have been supercharged in recent years by the rise of artificial intelligence, which has accelerated the pace of change.
However, by following the trends of prices, quant funds can be wrongfooted when unexpected events occur.
Patrick Ghali, managing partner at hedge fund advisory Sussex Partners, said quant funds had done very well in 2022 but this year had been more difficult.
He said: “The problem that happened this year was that a lot came in with similar positions to last year, and this didn’t work this year.
“You had very choppy markets in March for example, but generally lots of trend reversals this year, and in some ways these quant strategies are trend following. When you don’t have trends you can latch on to, it’s a struggle.”
The quant index made its sharpest losses in March after markets were roiled by the fallout from the collapse of Silicon Valley Bank and Credit Suisse.
Individual managers side-stepped most of the chaos and made much slimmer losses, HFR data shows.
Many quant funds were positioned for interest rate hikes but the SVB and Credit Suisse fallout prompted the market to start pricing in rate cuts, hitting their performance.
HFR’s quant fund index tracks funds that use statistical arbitrage and use high-frequency trading to exploit price changes.
HFR, which was founded in 1992, is the world’s most comprehensive database of hedge fund performance, with over 1,650 separate asset managers reporting into the database and many of the world’s largest hedge funds.
