How to Choose Your Hedge Fund Manager

Maybe you just assume that anyone who can make it in the financial sector is a shark by nature. Pop culture doesn't offer many counterexamples in a canon run by the likes of Wall Street's Gordon Gekko and American Psycho's Patrick Bateman. But in real life, the best hedge fund managers don't fit the stereotype — and those that do may not be worth the stress.

Social psychologists studied a decade's worth of personality traits in 101 hedge fund managers, as well as their track record with investments. They paid particular attention to the so-called "Dark Triad" of psychopathy, narcissism, and Machiavellianism. Rather than seeing any benefits from that kind of behavior, the research team found that investment portfolios actually suffered a little. Dark Triad managers produced returns that were on average about 1 percent less than the baseline personalities.

"We should rethink our assumptions that might favor ruthlessness or callousness in an investment manager," lead author Leanne ten Brinkeof of the University of Denver said in a press release. More important for client relations and for profits were leadership qualities associated with courage, humanity, and justice. Part of that disparity comes from how different hedge fund managers approach risk management. Those displaying narcissistic traits took more risks to earn the same returns.

If you're in a position to pick someone to manage your money and play the stock market, keep an eye out for anyone you'd want to see in a movie. There's nothing special about treating people (or investments) casually to increase returns.