An affinity for risk can be a very bad thing. Blow-up-your-hedge-fund-and-become-a-laughingstock kind of bad. Ask Brian Hunter. Also lose your job kind of bad, especially if your affinity for risk produces losses and you work at Brevan Howard. But an aversion to risk? You might as well start boxing up your cubicle right now, according to science.
Loss averse fund managers are far more likely to get fired than their more aggressive colleagues according to a recent study which found that 36% of the most risk averse managers were ‘involuntarily terminated’ over an eight-year period compared to just under 6% for the least loss averse….
The most loss averse managers (those that rejected both lotteries) were more likely to end up at fixed income and balanced funds, while the least loss averse went to hedge funds. Even so, the most loss averse were six times more likely to be terminated (though some of them found new positions with smaller funds).