Systematic vs Semi-systematic

Based on the most insightful WSO discussions, here's a breakdown of systematic vs. semi-systematic styles in macro:

1. Systematic Macro:

   • Systematic strategies rely heavily on quantitative models, algorithms, and data-driven approaches. These strategies often focus on time series momentum, trend-following, or other quantifiable patterns across asset classes like rates, FX, indices, and commodities.
   • While systematic strategies can deliver consistent returns, they are often seen as replicable. This means the intellectual property (IP) of the strategy is typically owned by the fund, not the individual PM. As a result, the payout for systematic PMs may be lower since the fund can theoretically replace the PM without losing the strategy.

2. Semi-Systematic Macro:

   • Semi-systematic approaches blend quantitative models with discretionary decision-making. PMs in this style use models as tools but rely on their intuition, market experience, and judgment to make final calls.
   • These PMs are often seen as having unique, non-replicable alpha due to their personal skillset and market insight. This makes them more valuable to funds, leading to higher payouts and guarantees. The perception is that their success is harder to duplicate, which gives them stronger negotiating power.

3. Compensation Dynamics:

   • The disparity in compensation likely stems from the perceived replaceability of systematic PMs versus the unique value semi-systematic PMs bring. Funds may view systematic strategies as scalable and less dependent on individual talent, while semi-systematic strategies are more tied to the PM's personal expertise.
   • Additionally, systematic strategies often involve larger teams and infrastructure, which can dilute individual payouts compared to the more concentrated nature of semi-systematic setups.

4. Market Perception:

   • There's a sense that systematic strategies, while effective, are more commoditized. Semi-systematic PMs, on the other hand, are often seen as "artists" who can navigate complex macro environments with a mix of data and intuition, making them more sought after in the industry.

In summary, the higher payouts for semi-systematic PMs reflect their perceived irreplaceability and the unique alpha they generate, whereas systematic PMs may face lower compensation due to the replicable nature of their strategies and the fund's ownership of the IP.

Sources: https://www.wallstreetoasis.com/forum/hedge-fund/demystify-systematic-macro?customgpt=1, What I've Learned About Hedge Fund Structure and Compensation, Compensation Structure At Quant VS Fundamental Funds, Qualities of a Great Investor, Performance of the best PM’s at MM’s?