The best hedge fund managers are not psychopaths or narcissists, according to new study

October 19, 2017, Society for Personality and Social Psychology
Credit: CC0 Public Domain

When it comes to financial investments, hedge fund managers higher in "dark triad" personality traits - psychopathy, narcissism, and Machiavellianism - perform more poorly than their peers, according to new personality psychology research. The difference is a little less than 1% annually compared to their peers, but with large investments over several years that slight underperformance can add up. The results appear in the journal Personality and Social Psychology Bulletin, published by the Society for Personality and Social Psychology.

While the average person doesn't invest in hedge funds, "We should re-think our assumptions that might favor ruthlessness or callousness in an manager," says Leanne ten Brinke, lead author and a social psychologist at the University of Denver. "Not only do these personality traits not improve performance, our data suggest that they many hinder it."

Researchers from the University of Denver and the University of California, Berkeley, measured personality traits of 101 hedge fund managers, then compared the with their investments and financial returns from 2005 - 2015. They compared not only the annualized returns, but also risk measures.

The researchers found managers with psychopathic traits made less profitable investments than peers, by just under 1% per year, but this can add up over the course of years on large investments. Managers with narcissistic traits took more investment risks to earn the same amount of money as less narcissistic peers.

Some may be surprised that most rank pretty low on the Dark Triad traits. However, the results did show correlations between traits, investment success, and risk management.

These findings build on their earlier work, studying behavioral evidence of Dark Triad traits in U.S. Senators, and finding that "those who displayed behaviors associated with psychopathy were actually less likely to gain co-sponsors on their bills," says ten Brinke. That study also showed those who displayed behaviors associated with courage, humanity, and justice, "were the most effective political leaders."

The results add to a growing body of literature suggesting that Dark Triad are not desirable in leaders in a variety of contexts, summarizes ten Brinke.

"When choosing our leaders in organizations and in politics," write the authors, "we should keep in mind that —like ruthlessness and callousness—don't produce the successful outcomes that we might expect them to."

Explore further: Are women more attracted to 'dark and brooding' men?

More information: Leanne ten Brinke, Aimee Kish, and Dacher Keltner, "Hedge Fund Managers With Psychopathic Tendencies Make for Worse Investors." Personality and Social Psychology Bulletin, online before print October 19, 2017. DOI: 10.1177/0146167217733080

Related Stories

Are women more attracted to 'dark and brooding' men?

February 25, 2016
A paper co-authored by a researcher from the University's Institute of Psychology, Health and Society states that women are generally drawn to men with dark and brooding looks. This in turn may relate to their reproductive ...

Study finds night owls more likely to be psychopaths

August 1, 2013
(Medical Xpress)—People who stay up late at night are more likely to display anti-social personality traits such as narcissism, Machiavellianism, and psychopathic tendencies, according to a study published by a University ...

People can correctly infer some personality traits from online profile

October 9, 2017
Job-related social networking sites (such as LinkedIn) are often used by recruiters to find new employees, because the profiles on these sites contain information on people's education level and work experience. Is it possible ...

Personality traits 'contagious' among children

February 3, 2017
When preschoolers spend time around one another, they tend to take on each others' personalities, indicates a new study by Michigan State University psychology researchers.

Psychopathy increases risk of violence in romantic relationships

October 27, 2016
People with higher levels of psychopathic tendencies are more likely to assault their romantic partners. They are also more likely to drink alcohol, a UBC study has found.

Recommended for you

When it comes to our brains, there's no such thing as normal

February 20, 2018
There's nothing wrong with being a little weird. Because we think of psychological disorders on a continuum, we may worry when our own ways of thinking and behaving don't match up with our idealized notion of health. But ...

Jymmin: How a combination of exercise and music helps us feel less pain

February 20, 2018
Pain is essential for survival. However, it could also slow the progress of rehabilitation, or in its chronic form could become a distinct disorder. How strongly we feel it, among other factors, depends on our individual ...

College roommates underestimate each other's distress, new psychology research shows

February 19, 2018
College roommates are sensitive to their roommates' distress but tend to underestimate the level of distress being experienced by others, finds a newly published study from New York University psychology researchers.

New approaches in neuroscience show it's not all in your head

February 16, 2018
Our own unique experiences shape how we view the world and respond to the events in our lives. But experience is highly subjective. What's distressing or joyful to one person may be very different to another.

Link between hallucinations and dopamine not such a mystery, finds study

February 16, 2018
Researchers at Columbia University Irving Medical Center (CUIMC) and New York State Psychiatric Institute (NYSPI) found that people with schizophrenia who experience auditory hallucinations tend to hear what they expect, ...

People find comfort listening to the same songs over and over, study finds

February 16, 2018
With the frequency that some people play their favorite song, it's a good thing vinyl records aren't used often because they might wear out.

0 comments

Please sign in to add a comment. Registration is free, and takes less than a minute. Read more

Click here to reset your password.
Sign in to get notified via email when new comments are made.