Well I can only speak from my direct experiences with my friend. He's actually one of the 3 partners for the fund. I know him (the trading partner) very, very well and the other partner (responsible for software development) pretty well. I've watched them build the fund from scratch.
They have a couple of client do's every year. I go to them, generally keep his wife company whilst he talks the talk with clients and other interested parties. If there is one constant over the 7 years when making chit-chat with his clients, it's about the brilliance they perceive of investing in a fund that is almost completely automated. The fact he has outperformed the algos and has a record from the last 20yrs that is not unusual but is certainly better performing than his algos over a longer period of time is of no relevance to his clients. His perceived value is in the area of trading strategy development, which is predominantly what he does when he isn't entertaining and expanding the business for the fund.
Although I still don't completely agree that is the only reason, I certainly think
there is an element of that present.
If that is your personal experience, I can't argue with that.
All I can offer as a counter argument is rentec's medallion fund:
Best Hedge Funds: Jim Simons Medallion Fund?s Returns and Alpha - Insider Monkey
That fund is only open to current and past employees and their families.
At least with that fund, there is no reason to impress anyone, as they are all
directly involved anyway.
I've always said this, and I stand by it now, I don't think automation is efficient
as good discretionary trading.
I also don't believe there is a best way, just the one that suits the individual.
As mentioned before, yes there is an undeniable client draw factor as well
as cost reduction etc.
Personally, I use it because I don't want to actively monitor myself,
as my typical trade duration is usually about as long as you can go without
holding overnight, unless its cut due to loss trigger.
BTW, good thread you started