When Hedge Fund managers, people who take in funds from a pool of people and invests in securities and other instruments, are dealing with millions of dollars, those investors want the managers' focus to be on their money. But as many know, when someone is going through a divorce, their minds are on a lot of other things. And while those Hedge Fund managers' work does suffer when they're going through a split, there is one other thing that trumps that in the minds of investors — marriage.
That's right. According to a study by University of Florida economists based on data collected from 1994 to 2012, tracking 786 managers who went through 857 marriages and 251 divorces, those who took the plunge found their funds take a bigger drop-off than those untying the knot. A fund's alpha — the measure of how much it beats the market — falls by an annualized 8.5% around the time of a manager's marriage. The alpha dips 7.4% during a divorce.
Of course, there are heavy deviations from this, but as one of the study's authors, Dr. Sugata Ray, noted, it all depends how involved that manager is in making the day-to-day decisions.
"It depends on how much of the secret sauce is actually coming from him," said Dr. Ray. Another big factor is whether a fund manager has partners to help steer the ship during a crisis. Managers that work alone "get clobbered when they go through marriages and divorces," said Ray. "They start to fall prey to behavioral biases, like selling their gains and holding on to their losses longer than they should."
Marriage hurts a hedge fund manager more than divorce (CNN Money)