Hedge Funds Have Lost Their Rhythm

Robin Wigglesworth has an article at the Financial Times about how algorithmic investing increases volatility, electronic trading leads to flash crashes, trend-following and volatility-targeting quantitative trading strategies are pro-cyclical, etc., the normal list of complaints. These complaints strike me as debatable—not that long ago people were worried that algorithmic trading created too little volatility—but plausible, and they are certainly the right category of complaints. Crowded pro-cyclical trading strategies really could increase systemic risk, electronic trading really does create the possibility of flash crashes, unmonitored computers really might rise up and enslave us, fine.

But the article also quotes some hedge fund managers whose complaints are from the wrong category altogether. Here’s (former) hedge fund manager Philippe Jabre: