Paul Tudor Jones, founder of Tudor Investment Corporation, said this week that when a hedge fund manager is going through divorce, you can immediately deduct 10-20% from his returns as a result of “emotional distraction”. This was seconded by Taylor O’Malley, chief risk officer at Balyasny Asset Management, who told attendees at the Eurohedge Summit in Paris yesterday 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.

When divorce disables trading ability 

Danny Kessler, chief executive of MET traders, a financial futures group specializing in proprietary trading, said he’s witnessed the damage that a messy divorce can do to traders’ performance.

‘Divorce makes people trade their P&L [profit and loss],” said Kessler. “Instead of saying I’ll buy that security at 99 and hold it until it reaches 101, they buy it at 99 and decide to hold it until they’ve made $100k. They trade their P&L figure rather than their position and stop making rational decisions.

“I suspect this is because they know they’re in danger of losing half their net wealth and are trying to recoup that,” he added.

One hedge fund manager who’s been through a difficult divorce confirmed that it’s hard to trade whilst dealing with family breakdown. “Trading is a 24-7 job. You need to be fully focused all the time and if you’re going through emotional pain, it’s difficult to look at the market objectively,” he said.

When trading leads to egomania and egomania leads to divorce 

However, the narrative may not be that simple. While divorce makes it difficult to trade effectively, there are also good reasons why traders will be particularly prone to getting divorced.

Traders need to be egomaniacs, said David Tuckett, a visiting professor at University College London and leading researcher in the role of emotions in economics. Successful trading is mostly about luck, argued Tuckett, but top traders will build a ‘conviction narrative’ which tells them that they have a system that allows them to beat the market. “Conviction is central to trading,” said Tuckett. “You need to believe that you have an approach which is rational and allows you to perform where other people can’t.”  

The spouses of successful traders need to accept their partner’s unwavering conviction in their trading ability. If they don’t, the trader will respond harshly, said Tuckett: “Traders identify any threat to their belief systems as extremely dangerous,” he said.

In one sense, Tuckett said traders make extremely appealing partners. In another, they’re intolerable egomaniacs. “There’s a fine line between someone who is self-convinced, exciting and potent and someone who is self-convinced to a point at which it becomes hard to relate to them,” said Tuckett. When traders cross that line, divorce is the result.

The divorced hedge fund trader said trading success can become all-consuming. “As you become more and more successful, you spend more and more time with the markets. At work you’re seen as a hero and when you get home you’re seen as the schmuck with his feet on the table. It becomes harder and harder to deal with.”

Avoiding the divorce trap 

Traders can clearly avoid divorce by not getting married. John Hughes, the ex-UBS trader who now runs a betting website, said that when he was at UBS very few people on the floor were betrothed. “There weren’t many people who were married – you’re so committed to the market, that it causes problems. I got into trouble an awful lot with my girlfriend for not being fully switched off,” he said.

Another is to take preemptive action to save your relationship. Greg Coffey, the 41 year old ex-GLG hedge fund trader, retired late last year in order to spend more time with his wife and children. Coffey’s wife was said to have objected to his long working hours.

The good news is that traders who get divorced and who come out the other side may become more productive as a result of being inured to emotional pain. Jon Moulton, the private equity ‘guru’, said in 2008 that companies set up by entrepreneurs who’d been through one divorce delivered better returns than companies set up by entrepreneurs who hadn’t been divorced at all. However, Moulton said returns plummeted once someone had been through two or more divorces because their private lives were too complex for them to be effective at work.

Alternative mutual funds act a lot like hedge funds, shorting with a range of asset classes from derivatives to ETFs and gold, but there are a few important differences. The first being that they’re available to the man-on-the-street – rather than accredited investors, as is the case with hedge funds – they also have limits on leverage and don’t charge the inflated 2 and 20 fee structure that so many hedge fund investors complain about.

The number of alternative mutual funds has been growing – from 112 in 2007 to 357 last year, according to figures from Morningstar – but it’s only in the past couple of weeks that they’ve looked like hitting the mainstream.  Morgan Stanley’s Alternative Investment Partners launched its first mutual fund, the AIP Dynamic Alternative Strategies Fund earlier this month while Goldman Sachs Asset Management unveiled its Multi-Manager Alternatives Fund that “offers exposure to a range of alternative and non-traditional investment strategies within the convenient structure of a mutual fund”.

A recent report by Citigroup, which predicted that retail assets in these alternative mutual fund vehicles would more than triple to $940bn over the next four years, has only added to the buzz. Headhunters working in the asset management sector are understandably excited, but say it takes a different sort of beast to work for an alternative mutual fund than a hedge fund.

Michael Castine, chairman, investment management at Korn/Ferry International, said: “It’s predominantly cultural – getting to grips with a working in a mutual fund targeting long-term returns for retail investors is a decidedly different proposition to that of an alternative shop. A more conservative approach is required.”

AQR is by far the biggest hedge fund player in the mutual fund space, managing 20 funds with $9.2bn in assets under management. Other firms, such as Aurora Investments and Arden Asset Management are offering mutual fund products through traditional money managers – Natixis Global Asset Management and Fidelity Investments respectively.

However, many believe that household names will dominate the alternative mutual fund arena because of their ability to attract retail investors. Kolhberg Kravis Roberts has recently entered the retail market, with Scott Nuttall, global head of capital and asset management revealing that it had built a new team specifically to attract investors during its conference call this month.

“We’ve built a direct high net worth team at KKR and so we are calling actively on high net worth individuals and family offices and that has actually worked quite nicely in that we have found we can build relationships with those individuals that will bring us deal flow,” he said.

The managers responsible for Morgan Stanley’s new fund don’t have a typical hedge fund background. Ryan Meredith, a managing director, has been working for the bank’s AIP since 2007, having previously been at Citigroup’s alternatives arm. However, he also has a background working as an actuary at Towers Perrin in London. Rui De Figueiredo, who leads the division, and Patrick Reid, and executive director, both have wealth management experience at Morgan Stanley.

Michael Martinolich, partner at hedge fund focused search firm Caldwell Partners, said: “Hedge funds have a myriad sales professionals who can sell to all types of institutional investors, but bridging that retail gap requires a different approach, methodology, and niche skill-set. There are real opportunities for asset raisers who can reach retail and related platform investors.”

No hiring projections were given, but the bank sounds pretty desperate to add sales staff. Nomura is eyeing talent in rates, credit, currencies and securitized products, and even said it would swoop up any talented U.S. investment bankers that come up on its radar, particularly in health and technology.

The decision to add headcount is fairly surprising considering the bank is in the midst of a $1 billion cost-cutting effort. Then there’s the fixed income sector, an area other banks like UBS are walking away from. But Chief Operating Officer Atsushi Yoshikawa said the bank is suffering from “a shortage of staff to reach clients.”

Fixed income staffers continue to retreat from Morgan Stanley, and there are likely thousands of former UBS bankers sitting around, so Nomura should have no problem filling seats.

Who’s Your Daddy? (eFinancialCareers)

Succeeding as an entry-level financial advisor takes an impressive personal network along with an understanding that, for the first two to five years on the job, you’re nothing but a salesperson.

Blooming at the Right Time (WSJ)

Bloomberg has launched a new chat service designed specifically for foreign-exchange traders, giving them a singular avenue to negotiate, make and report trades. It was put together before the spying scandal.

Trading Staying in New York (eFinancialCareers)

Goldman Sachs is actively growing its operations in Salt Lake City, but has no plans to open a trading floor in Utah.

Three More Execs SAC’d (WSJ)

Three close confidants of SAC Capital founder Steven Cohen have been subpoenaed as part of the federal government’s insider trading case. Compliance Chief Steven Kessler is among the group.

Hopefully They Were Good Seats (The Republic)

Proxy firm Institutional Shareholder Services, which made waves earlier this month by recommending shareholders strip J.P. Morgan CEO Jamie Dimon of his chairman role, is back in the news. The firm was fined $300,000 after an employee leaked information on confidential proxy votes in exchange for tickets to concerts and sporting events.

Changing Seats (Reuters)

J.P. Morgan has named Barry Sommers the new chief executive of its consumer bank. Sommers will take over for Ryan McInerney, who is headed to Visa.

Poaching War (Financial News)

Chicago high frequency trading firm Jump Trading has grown its London headcount from 10 to 25 in the last year. The firm just poached a team of traders from Bank of America.

Buzz Around the Office

She’s the Princess (YouTube)

Ever wonder what your outlandish conversations with your kids would sound like if they took place between two grown men? Now you don’t have to.

List of the Day: Interview Mistakes

Hiring managers make mistakes in interviews too, often scaring away top talent. Here are a few big ones.

1. Not studying the resume before the interview.
2. Not taking notes.
3. Rushing through the process.

(Source: Glassdoor)

Local insurance firms and financial services recruiters have noticed that out-of-work bankers have cottoned to the growth potential of the Asian market. A recent report by Munich Re said that premium income for the insurance industry in the Asia-Pacific region would double to by 2020. The contribution from “emerging Asia” markets like China or India would be nearly 70%, it said.

Jay Chan, head of talent acquisition for AIG, say she is seeing some people leaving the becalmed banking sector for a more buoyant insurance industry: “This is a growing trend. The banking industry, especially investment banking, has been going through some restructuring and cost-cutting across the region. People are now looking at industries that are expanding or going through sustained growth, and the insurance industry is one of these.”

But bankers working in front office roles will find it more difficult to make the switch. Chan says most of the activity is taking place in middle and back office functions where skills sets can be transferred easily. “Front office roles tend to require specialised skills that are less relevant for the insurance industry.”

Christian Fischbach, manager at Hays Insurance, says that he has seen some bankers becoming more open to moving out of the business, and considering insurance as another option. “Part of it is down to people aiming for greater security, rather than the kudos that go with being in an investment banking role.”

But he adds that insurers prefer to hire staff from their competitors, something that is echoed by Chan, who says that most of AIG’s new recruits come from the competition. “(But we also consider) people from the wider financial services industry and even non-financial industries, such as FMCG and manufacturing.

“There is always a demand for strong underwriting and actuarial experience as there is a limited talent pool in this area.”

A recent report from Research and Markets on the Asia-Pacific insurance market estimated that direct written premium income in Asia-Pacific should rise at a compound annual growth rate of 11.2% in the next four years, fuelled by growing middle class populations in India and China. 

In an interview with Bloomberg TV today, Lloyd Blankfein said Goldman employs staff across various functions in Salt Lake City, including legal and research. However, while headcount is likely to continue increasing in the desert center, Blankfein said it is unlikely that Goldman will ever open a trading floor in Utah.

Trading floors tend to be “aggregated in particular time zones” said Blankfein. With a trading floor come a variety of other functions like operations and technology, said Blankfein. As a result, trading floors tend to be situated in hub markets – like New York or London.

Even as Goldman’s Salt Lake City operation grows, the firm’s New York traders are unlikely to be called upon to move to Utah.

Alice Mackintosh, a nutritional therapist at the Food Doctor Clinic in London, said people working in jobs like banking – where lunch is a sandwich snatched whilst staring at a screen – are particularly prone to bloat. ”If you’re eating while looking at a screen you will often not chew properly and have problems digesting food,” MacKintosh told us. “This can cause fermentation, bloating and flatulence, which will affect your energy levels if you’re working long hours.”

One financial services professional who seems to have beaten the bloat and low energy risk is Christine Lagarde, the immaculately groomed managing director of the IMF. Lagarde told the Wall Street Journal she doesn’t drink. doesn’t smoke, doesn’t eat meat and does listen to her body – especially when she’s travelling across different time zones. ”I don’t fight with my body anymore. When I sense that it needs a 10-minute doze, I let myself doze. I might sit in the back of a car and tell the person next to me just give me a break, don’t talk to me, I’m going to sleep,” Lagarde said.

Nassim Taleb: the paleo diet 

Nassim Taleb, the trader and author, seems equally solicitous of his digestion. Taleb told the Guardian that he follows a ‘paleo diet’ – only eating easily digestible foods of the kind that a caveman would recognize. Sugar is out. So is Coca-Cola. Taleb fasts intermittently for 17 hours at a time, goes to bed at 8pm and gets up at 4am.

Banking health freaks and health fiascos

Bankers are advised to emulate Taleb and Lagarde, and to chew their food properly. “Digestion is very strongly linked to psyche,” said Mackintosh, who has given talks on nutrition to financial services clients.

The threat that banking poses to health is already well established. Alexandra Mitchell, a an ex-investment banking associate-turned assistant professor of management and organisation at the University of California, conducted a study of hundreds of corporate financiers and traders at two investment banks and found they tend to get locked into a cycle of bodily abuse simply to stay ahead of the game.

Geraint Anderson, the ex-equity researcher and author famous for his hedonistic portrayal of City life, said bank employees often fall into one of two categories. “You have the body fascists – the fitness fanatics who run to and from the office every day, and you have the heavy drinkers.” Comparatively few of the fitness fanatics were Britons, Anderson recalled.

Personal trainer Robert Dyer said bankers’ health and fitness tends to vary widely.”There’s a few bankers that I work with. One of them has trained for the marathon and is really fit, others are used to having boozy lunches and taking clients out – they drink a lot and do other things which I wouldn’t mention on the record.”

Banking professionals turn to take care of their health as they approach their sell-by date, said Dyer. “One day, they look around and notice they’re surrounded by young people,” he told us. “Suddenly they decide to do something about it.”

Working out is one option, so is eating carefully and getting sufficient sleep. Lagarde is 57. Taleb is 53. Bloated young bankers could do worse than emulating their clean living elders.

Related links:

Stressed out bankers overworked and underpaid 

Goldman’s head of wellness says mental health is probably the biggest issue at Goldman Sachs 

How banking can ruin your body and mind 

Â

Â

Yin and Yang

Two people in their mid-twenties, each who asked to remain nameless, took a job as a financial adviser a few years back, right around the time of the financial crisis. One at Wachovia Securities, now Wells Fargo Advisors, and the other at Merrill Lynch. They were both college-educated, but the latter had the network: family and friends of family who had money. The former didn’t have a relationship with any high-net-worth families.

One made warm calls, the other cold. One is still in the business while the other is in a whole new line of work. You can guess which one is which.

“In the interview, nearly all the questions are about who your parents are, who their friends are,” said the former Merrill Lynch adviser, who has since moved on to another firm. “Money is a funny thing. Understandably people want to know the person they hired is trustworthy.” In five years on the job, he’s never made a cold call.

“The advice used to be that family and friends are the last people you want to do business when you’re new and prone to make mistakes,” said Paul Werlin, president of Human Capital Resources, a Florida-based financial services recruiting firm. “Now, it’s part of the overall strategy.”

The Wachovia broker’s work-life was quite a bit different. He paid for a list of names and numbers from a service and began pounding out cold calls, offering people on the other end of the line a free financial review in an effort to get in front of them. “Most of the time I’d get my name out and then hear a click,” he said. His greatest opponent was a Griffin system, preventing him from contacting those on the do-not-call list.

“Everyone who has succeeded in the business will tell you that they made it by cold-calling,” he said. “It’s a crock.” His former boss told him the same thing: he made cold call 10 hours a day until he made it. “I later found out his top 10 clients were family,” he said.

The attrition rate for entry-level financial advisers is lofty; experts speculate that only 10% to 20% stick. The former Merrill Lynch adviser came in with a class of 30 recruits. Before he left three years later, he was the only one remaining.

“From my view, I represent the last generation of kids who are hired blind,” said the former Wachovia adviser. “With no network of rich friends, no business-to-business background.”

In fact, Werlin said that some banks are now targeting older entry-level professionals, people who worked in completely different industries but who are looking to make a move into finance. “There are a large number of people in their 30s or 40s making career changes. They have better, more trusting networks.”

How to Make It In Wealth Management

Even with a strong network, growing into a successful financial adviser is no walk in the park, hence the propensity for wirehouses to poach experienced talent from rival firms by offering huge signing bonuses.

“Even family members can be tough,” said the former Merrill adviser. “You naturally think they’ll hand it to you. Really, you need to get a little bit lucky.”

His best piece of advice to newbies: know that it’s a 100% sales job. “If you want to find out who’s not going to make it, walk the bullpen and look for the guys sitting at their desk analyzing charts or looking for the next great stock pick” he said. “It’s a complete waste of time. You should spend every minute growing your book.”

Having a lot of hobbies is helpful to networking and growing your business. Golf, horseback riding, mountain biking and squash are great ways to meet people, he said. Getting on boards of clubs and non-profits is another great networking tool. One woman he works with found clients through a book club.

“Ask everyone what they do for a living, then they’ll ask you back,” he said.

If you found work at a large bank, network within the company, Werlin said. Retail operations can offer great leads. “Tellers see dividend checks and have access to lists of expiring CDs,” he said. “It’s a great way to talk to bank customers about investment options.”

But perhaps the best way to make it as an entry-level financial adviser: joining a team. Goldman Sachs brings new private wealth management hires under the wing of experienced advisers, for example. But those jobs are much harder to get.

Until recently, the banking sector wasn’t a big target for Saudi Arabia’s Nitaqat localisation system, aimed at bringing more Saudis into the workforce. However, the Saudi Arabian Monetary Authority has given banks three months to outline the jobs that could be reserved exclusively for locals and aims to increase the number of Saudis in the banking sector by 95%.

Understandably, expats working in the kingdom have reason to worry. “At the senior end succession planning within the large local banks has been going on for years, but there’s still a relative shortage and banks need to pay very well to attract and retain local executives,” said Magdy El Zein, managing director of headhunters Boyden Middle East.

International firms like J.P. Morgan have been building in Saudi, while Morgan Stanley and Credit Suisse have been shifting equities bankers from Dubai to the kingdom in order to capitalise on growing trading volumes. Russian bank VTB Capital is also considering launching a Saudi operation.

However, outside of the multinationals most expats are only being drafted in for their specialist expertise, argues Peter Greaves, managing director of IES HR Consultants in Dubai.

“Outside of investment banking, there’s a real push for risk and compliance staff from the UK, US and Australia,” he said. “In particular, anti-money laundering expertise is growing in demand and those with experience in sophisticated Western markets are being snapped up.”

Manuel D. Ron, global head of co-development and investment banking at Integration Capital & Trade (ICT), an international firm that focuses on Saudi Arabia, believes that the localisation push will hit expats from South Asia, Northern Africa and the Levant, who are working in junior and mid-level roles that could easily be filled with local candidates.

“Expats with venture capital, private equity, asset allocation and international understanding and reach will bring the type of value needed in Saudi,” he said.

Getting the mentality right to succeed in Saudi

Making it in Saudi is about more than simply possessing a niche skill-set. Expats are encased within the Saudi compounds that can often mean bankers are cut off from local life. Getting the buy in of your family is integral, said Greaves.

“The entire social life within the compounds revolves around mixing with other married expats, usually with young children,” he said. “It can be difficult for single expat bankers to make it, not necessarily professionally, but because they feel cut off socially.”

There’s also the fact that most people assume that the same tactics that succeeded in their professional life in London or the US will work in the Saudi market. Often, investment bankers are recruited for their technical expertise, but it’s their personality that lets them down, said Ron.

“Personality traits which are rewarded in New York, for example, will cause significant problems for everyone in Saudi, he said. “What works in New York, whether technical elegance or a pushy, impatient characteristically New York attitude will not work in Saudi. I think the Brits have an easier time in Saudi due to a more controlled approach, followed by the Australians.”

In any case, there are reasons to believe that Saudi will soon make efforts to attract more expats. It’s new King Abdullah Financial District in Riyadh is aimed at making a challenge for Dubai’s regional dominance, but for now it remains largely empty.

In an unusual example of reverse nepotism in financial services, Ken deRegt, the 57 year old head of Morgan Stanley’s fixed income business, has decided to leave Morgan Stanley and join Canarsie Capital Group, a new firm which happens to employ his son. DeRegt is being replaced at Morgan Stanley by two younger men: Michael Heaney, 49, and Robert Rooney, 46. Heaney and Rooney will be the new co-heads of fixed income sales and trading. Heaney is currently global head of credit sales and trading at Morgan Stanley. Rooney, is head of fixed-income sales and trading in Europe.

DeRegt’s departure comes at a difficult time for Morgan Stanley’s fixed income business, which didn’t have a great first quarter, but is committed to maintaining its headcount. Financial News notes that the latest changes mean Morgan Stanley has had at least five different people running its fixed income division since 2007. 

Headhunters said Morgan Stanley’s fixed income business has been leaking staff and that deRegt’s not alone in quitting. Natalia Zhminko, a leveraged credit sales vice president has left, allegedly for Deutsche Bank. Rishi Singh, an executive director on the FX team has also left, allegedly for Brevan Howard. Colleagues of Zhminko’s confirmed her departure and the Financial Services Authority register shows that Singh left in March. Bloomberg reported in April that Brian Perry, ex-head of real money sales at Morgan Stanley, is joining Toronto Dominion Bank.

“Around six people have left Morgan Stanley’s European FX sales team in the past month,” said one headhunter, speaking anonymously. Morgan Stanley declined to comment, but an insider said that this sounded like an exaggeration and that staff turnover was no higher than usual.

Nomura hiring in fixed income 

Fixed income professionals who get out of Morgan Stanley could join Nomura. Atsushi Yoshikawa, chief operating officer at the Japanese bank, said Nomura is hiring fixed income professionals in Asia, the U.S. and Europe.

Nomura declined to comment on the numbers it plans to hire, but a Nomura spokeswoman told us the bank is hiring “selectively” where it sees, “good opportunities for growth in global markets.” 

One headhunter who works with Nomura bank said the bank is hiring “across the board” in fixed income, with a particular focus on Asia.

American-based banks have taken more investment banking fees from U.K. clients year-to-date than hometown British banks, earning a 38.2% market share in the U.K., the highest since 2009, according to Dealogic. Local banks, meanwhile, own just a 27% share of U.K. investment banking revenue between January 1 and May 22, down from 35% during the same period last year. What’s more, investment banking revenue generated from U.K. clients is actually up on the year.

Admittedly, Royal Bank of Scotland, a state-owned bank looking to privatize itself, has essentially walked away from investment banking, contributing to the drop in local activity. But still, the numbers are eye-opening. U.S.-based J.P. Morgan has earned $133 million in the U.K. itself, accounting for roughly a 10% market share, trumping that of local banks like Barclays and HSBC.

Aging Bankers Turning to Booze and Bibles (eFinancialCareers)

Drinking and drugs are a young man’s game, unless you’re stressed out and working on Wall Street, apparently. Results of a new eFinancialCareers survey suggest that the longer you work in financial services, the more likely you are to rely on drugs and alcohol to manage stress.

An Insider Among Us? (WSJ)

Wall Street remains skeptical of a series of trades in Saks shares that were made just minutes before news broke that the company was considering a sale, making the still unknown traders huge profits.

BNY to Add 100 Wealth Managers (eFinancialCareers)

Over the next two years, BNY Mellon Wealth Management will grow its sales force by 50%, and plans to add private bankers, mortgage bankers, portfolio managers and wealth strategists in key markets across North America.

Comp Up for Finance Execs (AFP)

Average salaries for employees working in finance departments at corporations increased by 3.4% in 2012, according to a new survey. Only executives saw their average percentage increase grow from the previous year.

U.S. Bonus Caps (Here is the City)

The European Parliament plans to pressure the United States into adopting bonus caps similar to European ones in an effort to make the playing field more level. Similar regulations aren’t likely, Alan Johnson, founder of compensation-consultant firm Johnson Associates Inc., told us in March.

Hedge Funds Stink (FIN Alternatives)

The average hedge fund trails the Standard & Poor’s 500 Index by about 10 percentage points, according to Goldman Sachs. Maybe that’s why they keep closing every day.

Buzz Around the Office

What Happens at Bieb’s, Stays at Bieb’s (TMZ)

If you want to party with teen heartthrob Justin Bieber, and who wouldn’t, you’ll need to sign the most insane liability waiver ever created. One stipulation: If you tweet about the party or Instagram a picture, you’re on the hook for $5 million. Seems fair.

List of the Day: Hating Your Job

Working at a job you hate? Try doing this.

1. Find a work friend and commiserate.
2. Build time into your calendar to recharge.
3. Look for a new one – actively!

(Source: AOL Jobs)