Steve Cohen's Shrink in High Demand

We know how bad last year was for the hedge fund industry: investment losses of 18 percent, and a 48 percent decline in total assets thanks to fleeing investors.

If you're a hedge fund manager, you're understandably stressed out. It's time to hit the couch.

Or so says Dr. Ari Kiev, who has been SAC Capital's very own in-house Dr. Phil for the past 16 years. Kiev announced last week that he is forming a new consulting firm, Kiev Consulting, to help hedge funds deal with the pressure from this market turmoil and economic downturn.

Kiev had been consulting almost exclusively for Steven Cohen's hedge fund, but based on the number of calls he's gotten in the past year from other fund managers seeking help, he thought it was time to open up the rest of the industry to his services.

"Hedge funds have more worries about drawdowns, problems managing portfolios, and implementing the behavioral changes required to adhere to good risk practices," he said when reached by phone on Thursday.

A licensed psychiatrist, Kiev previously worked with Olympic athletes, helping them establish goals and maintain focus in the face of high anxiety situations. Cohen heard about him and brought him on board to coach his analysts and traders in similar accomplishments. Since then, Kiev has published several books on mastering risk and trading strategies.

His role with hedge funds is part management consultant, part behavioral scientist. A losing trader is much like the Olympic ice skater who can't complete his triple jump: performance issues. Kiev helps them overcome their fears and put their minds in the place where they can believe it's possible to achieve their goals.

In other words, Kiev isn't the guy you call when you think your trader is suicidal. He's more like the guy you call when your trading floor needs to hear the message from The Secret.

In market downturns, Kiev says, traders have even more behavioral issues to deal with than in boom times. They need help lowering their expectations and being patient in order to achieve results. Some funds need to implement entirely new strategies, which come with a new set of objectives. Problems with communication between portfolio managers, analysts and traders tend to complicate matters during stressful times.

"The more you're losing, the more inclined you are to act in a way that's not productive," he says.

Kiev says that over the years as SAC Capital grew in size, many of his recommended practices became institutionalized within the ranks of the firm, so they needed his services less and less.

As for the growing volume of hedge fund closures right now, Kiev isn't worried. "I've had enough interest and inquiries that it makes sense," he says.

by Megan Barnett