Stressed Out on Wall Street

Today's investing professionals have a modern set of coping strategies, including prescription drugs, wellness programs, and the long view

by Steve Rosenbush

Over the summer, hedge fund manager Nandu Narayanan found his temper growing short. At the height of the selling in August, the credit markets ground to a halt and many banks and hedge funds were forced to divest assets at steep discounts. Worry about the extent of risk in mortgage-backed securities reached a fever pitch, leading to a 10% correction.

"The situation we have been in for the past few weeks is the most stressful of times," says the 43-year-old Narayanan, who actually made money amid the turmoil (BusinessWeek.com, 8/27/07) due to his short positions. "For me, it is agonizing." The founder of the $100 million hedge fund Trident Investment Management was hardly alone.

This wasn't just any old correction. It was a financial crisis on par with the meltdown in the Asian markets in 1998 or the U.S. tech-stock collapse in 2000. Some parts of the credit market essentially shut down, making it nearly impossible for traders to value their assets or sell them at anything but a deep discount. The losses at Citigroup (C) hit $5 billion, and at Bear Stearns (BSC) two highly leveraged funds imploded (BusinessWeek.com, 10/11/07) amid the financial carnage. But those losses, however large, can be written off. In most cases, the investor or fund simply moves on.

Emotions Run High

But the personal toll from such events can be just as great, and even more complex. Such an episode creates enormous stress for asset managers, who may face personal financial ruin and the loss of their clients' money, not to mention power, prestige, status, and identity. It's a career-ender for some and a major test for others.

The psychic toll extracted by the market is seldom discussed outside the home or small circles of friends. "Wall Street is supposed to be a tough crowd, and most people just suck it up," says recruiter Alan Hilliker of executive search firm Egon Zehnder International.

Traders and bankers cope in various ways. Some drink heavily or use illegal drugs. During the go-go years of the 1980s, the atmosphere was looser and Wall Streeters' tempers ran freer. One hedge fund manager, who declined to be identified, recalled a 1989 incident when he was a trader at Salomon Brothers, the investment bank now owned by Citigroup. He says he looked on as a well-regarded analyst walked from his office to the trading floor, where he encountered a bond trader. The conversation between the two ended when the analyst picked up a computer monitor and hurled it to the floor in frustration, the former trader says.

Changing Norms

While Wall Street still has its rough edges, the culture is far more straitlaced today than in past eras. "It's more institutionalized," says one hedge fund manager. It's no longer acceptable to deal with your stress by hurling a computer on the floor or by indulging in drink, drugs, or alcohol. As a practical matter, the threat of a lawsuit is much higher than before. And traders are generally a more professional group than in past decades. "There weren't as many Wharton MBAs on the scene during the 80s," says the fund manager, who spoke on condition that he not be identified.

Today, when drugs are employed against stress, they're more likely to be the prescription variety. Another hedge fund manager, speaking on condition of anonymity, says he has been taking antidepressants for years. While his work didn't cause his depression, it can exacerbate it. That can lead to a modification in medication or work habits. He once even closed a particularly troublesome fund at the urging of his wife, who said it was leading to severe stress that was affecting his behavior and disrupting their marriage.