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Why hedge fund traders should stay married, redux

Emotional upset is not good for alpha generation.

Emotional upset is not good for alpha generation.

David Tepper, one of the highest earning hedge fund managers in the world, is reportedly splitting up with his wife. The cause of Tepper’s marital ruction is unclear. However, he has been known to joke about spending his billions on planes, islands and 22 year-olds.

Tepper’s estimated wealth is $10bn, but splitting the proceeds of a life spent successfully managing money between himself and his wife of 28 years, may not Tepper’s main concern. The big issue could be his performance in the near future, or lack of it.

Last year, rival hedge fund manager Paul Tudor Jones said tht traders going through divorce almost always generate returns 10%-20%  below their average due to, “emotional distraction.” Taylor O’Malley, chief risk officer at Balyasny Asset Management, said that he sometimes cuts portfolio managers’ capital in half if they’re having marital problems, on the grounds that the emotional distraction leads to a lack of focus. And Danny Kessler, chief executive of MET traders, a financial futures group specializing in proprietary trading, told us that divorcing traders tend to take bigger and less considered risks. “I suspect this is because they know they’re in danger of losing half their net wealth and are trying to recoup that,” Kessler said.

Tepper’s investors may want to watch out. On the other hand. George Soros has been married and divorced several times without any apparent repercussions.

 

 

 

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