Markets fall. Heads roll, salaries and bonuses are slashed, businesses fold. Managers are under the spotlight more then ever, but there is a personal toll that is not often talked about. CATHERINE JAMES reports.
When David Bowie and Freddie Mercury sang a duet about stress, they said it splits families in two, and puts people on streets. If the current state of the market hasn’t got the people managing your funds stressed, you have to wonder what they are on. Yet managers asked to comment on how they’re coping with the stress, or what businesses are doing to alleviate the burden on their managers tend to reply with a variation of “we’re not affected”.
But stress happens. John Nolan remembers during a particularly bad period for markets during his asset consulting days, hearing about a particular manager being told by his boss to go and have a check-up. The doctor was concerned enough to order the manager to immediately have eight weeks off.
An organisational psychologist who has worked with clients in the finance industry says the lack of discussion about the impact of the state of the markets on the mental health of managers in this industry could be symptomatic of a systemic denial. Jim Bright of career management consultancy Bright & Associates, and author of nine books including Stress Smart, says in the current market there is a tendency to under-report, including perhaps on how a manager is coping. Funds management is an industry with unique pressures, he says. “It’s a confidence industry – you are judged a lot on your confidence. This can be very isolating when things turn bad.” “It’s an industry that is perhaps more dedicated to developing prestige networks – that support career advancement and the like – than to support networks.”
Judging how someone is coping boils down to three fundamental measures. First of all there is demand. If someone’s workload or environment has increased the demand on them, this can lead to increased stress if support is not at hand, Bright says. Second, increased demand leads to stress when there is a loss of control or at the extreme, a feeling of hopelessness. A sense of a loss of control is the biggest predictor of stress. “And in the financial markets they’re experiencing an acute loss of control,” he says. “Especially when things have been hunky-dory for so long, and then to have it unravelling at such an alarming rate, people would definitely be under more intense stress, particularly if they’re seeing their income in tatters.”
With sufficient social support, even very difficult environments can be weathered, Bright says, however, the finance industry will probably find its professionals do not easily ask for help when they need it. Peculiar to the finance industry is that is it still male dominated, and many of those are ‘alpha males’ who like to be in control, and have a ‘master of the universe’ or invincible mentality, according to Bright. It’s also an industry with very intelligent, very clever people who are used to being successful, and used to solving problems, making it harder for them to admit their struggles and seek assistance, he says.
Also, given managing money does not “inherently” require people skills, Bright suggests some managers may not know how to talk about their concerns. The head of fund-of-funds manager St George Investment Solutions, Patrick Farrell, is acutely aware of the impact the state of the equity markets can have on the managers to whom he has assigned money. So much so, he jokes the markets stress him out more than they do the managers. “When you see volatility and corrections of this nature, managers can be tempted to change how they do things,” Farrell says diplomatically. “When markets are in the state they are in, they’re not driven by fundamentals. But many managers have built their models on fundamentals – so they can end up throwing their models out the window.”
In volatile markets Farrell says he stays closer to his managers than usual, “looking over their shoulder more”. “I don’t think they feel more comfortable with that, but we do. And that’s part of our role because if we were to see signs that a manager was under pressure then we have all the more time to react to that if necessary.”
Thankfully, no such action is necessary at this point, he says. Farrell even feels somewhat sorry for the new listed property managers who were introduced into St George Investments portfolios last September. “In hindsight, we would prefer a less volatile time for the managers to be able to get comfortable. As it was, property was all over the place at the end of September.”
The founder of boutique incubator Pinnacle Partners, Ian Macoun, says while he has no formal processes in place to deal with manager stress at the moment, he is aware of the current circumstances they are working under and tries to be closer to them. “It’s more at a personal level of talking more frequently with them, so they just know there’s another friendly, interested, and understanding person around.”
Macoun says the stress on the markets will ultimately test business structures as well. This is one area he feels Pinnacle is more robust than some others as the contract between Pinnacle and its start-up boutiques takes some of the business management pressure off at a time when revenue may be dropping. The recent agreement with Solaris Investment Management includes a commitment from Pinnacle to support the manager with a large amount of capital for the next few years, “allowing them to just focus on producing returns for clients without the business pressure of building revenue”.
The two structures most at risk, according to Macoun, are those boutiques not strongly capitalised, and institutionalised fund managers who are under increased pressure from a parent that continues to demand revenue, or worse, threatens to sack if expectations are not met.
Farrell says he does ask the personal questions during times of market stress, but equally he asks about the decision-making behind the portfolio. “We do ask how are you coping? [We also ask] are you making any decisions over-riding models, what’s the time horizons you’re focusing on [with those decisions] – which is very important.”
The personal toll on managers is an important issue, he says, but then again “managers do get paid big bucks and they should be able to handle this sort of thing”.