Researchers find hedge fund managers with narcissistic, psychopathic tendencies less reliable
WASHINGTON — Well-to-do investment and hedge fund managers are often portrayed on the big screen as holier-than-thou, narcissistic figures with potential psychopathic tendencies. (Wall Street, American Psycho, The Wolf of Wall Street, to name a few) But is this characterization of the financial sector’s finest an accurate portrayal?
Turns out the most self-absorbed money managers may actually be the worst at turning a profit on investments, a new study finds.
Researchers at the University of Denver and UC Berkeley examined the personality traits of nearly 101 hedge fund managers, allowing them to evaluate these characteristics against their financial performance over a decade-long period.
Managers who exhibited any one of the three “dark triad” personality traits — psychopathy, narcissism, or Machiavellianism — brought home about one percent less in gains annually, the researchers found, which can add up over time.
“We should re-think our assumptions that might favor ruthlessness or callousness in an investment manager,” says Leanne ten Brinke, the study’s lead author, of her team’s findings in a press release. “Not only do these personality traits not improve performance, our data suggest that they many hinder it.”
Narcissistic managers were more inclined to take greater risk to potentially earn better returns, a strategy that backfired over the long-term, they note.
The researchers acknowledge that while most investment managers rank low on the dark triad, for those who did exhibit such traits, it had a significant bearing on their risk management skills and portfolio returns.
Previous research conducted by ten Brinke et al. on how dark triad personality traits affected the performance of American senators found that “those who displayed behaviors associated with psychopathy were actually less likely to gain co-sponsors on their bills.”
To help foster success in Congress, it instead pays dividends to display behaviors associated with courage, humanity, and justice, they wrote.
This latest research is the latest piece of evidence to suggest that the best of leaders aren’t excessively forceful or self-absorbed in disposition.
“When choosing our leaders in organizations and in politics, we should keep in mind that psychopathic traits— like ruthlessness and callousness— don’t produce the successful outcomes that we might expect them to,” the researchers conclude.
The full study was published online yesterday in the journal Personality and Social Psychology Bulletin.