We examine the effects of algorithmic trading (AT) on the US mutual fund industry and find that funds holding stocks with higher AT intensity have lower holdings returns and higher interim trading profits (return gap). This effect survives controls of effective spread and execution shortfall....

We examine the effect of algorithmic trading (AT) on the US mutual fund performance and find that funds holding stocks with higher AT intensity have lower holdings return and higher interim trading profits as measured by return gap. This positive effect of AT on return gap survives controls of...