HFT is the new active manager. - They manage a lot of $ - They don't track an index - They adapt with the market - They're 50% of market volume - They're in the market to make $ - They focus on risk management
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my take is that while the sharpe's look great, it's really about sale of a product -- liquidity -- than an investment strategy. and can't accommodate the capacity of a good l/s HF AUM (viking, maverick, third point), let alone a proper active manager at scale (fido, cap,
$ivz).
In some circles I've heard active management described as the art of providing liquidity. "Apple's stock price is too low, I'll provide liquidity to eager sellers by buying shares on the cheap" and vice versa...
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Absolutely. That's the canonical definition of "trading alpha" -- when an active manager's trading desk sees liquidity-driven dislocations that provide attractive entry & exit points not associated with news flow or other items on a PM's mind.
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A great example of this was the August 2012 Knight glitch. Unlike the May 2010 "flash crash," which was market-wide and ultimately intermediated by regulators after close, active managers leaned into aberrant markets moves to take the other side.
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