College professor says clients listen to their hearts
Emotions are at the heart of every judgement that is made in financial services, a professor of psychoanalysis has told delegates at the CFA annual conference.
In a session entitled 'The risk of emotions: understanding what drives investors', David Tuckett, visiting professor of psychoanalysis at University College London, spoke on insights from interviews with fund managers on the role of human factors in investment.
Mr Tuckett interviewed 52 portfolio managers, responsible for a total of £305bn ($500bn), in 2007.
He said that, as an outsider, what struck him most about being a portfolio manager was the need to deal with uncertainty, "massive information ambiguity" and a deluge of information.
He said: "Emotions are at the heart of every judgement made in this environment: what information matters and what doesn't.
"Every single manager had clear, thought-out reasons for everything that they did."
Mr Tuckett observed there was a constant tension between portfolio managers and the person who employs them, especially in the case of underperformance.
He said: "They are employed to provide above-average returns. To do so, they have to claim they can find exceptional investments."
Asked by Arnold Wood, of Martingale Asset Management, about the effect of gender and whether female portfolio managers were more anxious, Mr Tuckett said there were three women interviewed in the sample and all were very high-performing professionals.
He said: "There was some evidence that women worry more when they make mistakes. However, investing is a macho culture. If it were more equal, it would change the culture. I believe this will inevitably happen, due to pressure from clients."