“Should investors favour the systematic approach, sometimes known as a black box approach… Or should they favour the discretionary approach that relies on the instinct and experience of humans…? The short answer in both cases is no. The long answer is more nuanced.”
“Christopher Keenan, director of strategic marketing at Welton Investment Corporation, says investors should not willingly narrow their choice to just one of the two strategies. Both share attractive return traits and performance is generally non-correlated to equities. They offer potential for equity market tail risk protection (primarily managed futures), and decades of historical track record…
Moreover, the two styles often complement each other… This, he explains, is because discretionary managers are often looking for early fundamental price/value differences, whereas systematic managers often follow the ensuing capital flows to right these fundamental imbalances.
“Why should an investor deliberately limit their exposure to just one of these viewpoints?” he asks. “They shouldn’t… In my opinion investors should be contemplating the proportion of each that makes the most sense for their particular portfolio.”