

"We actually administer a three-step personality exam that's conducted by a former CIA interrogator," Karp told hedge fund recruiter Ilana Weinstein, the founder of IDW Group, this week during the Milken Institute's Global Conference.

Karp said that he learned about this type of test at his previous employer two firms ago. (By the way, that would be Steve Cohen's SAC Capital). 

The test helps identify positive attributes as well as red flags. 

Karp explained that the "single most important variable" they screen traders and analysts for is something called "openness to change," meaning how well you're able to quickly change you mind when presented with conflicting information.

"And I found that ['openness to change'] combined with a variable that's in psychology called 'grit', in our business we call it 'resilience', those are the two factors we search for the most." 


When it comes to the hiring process, he has three buckets into which he sorts candidates:

Excellent candidate: These candidates possess the variables of openness to change, resilience and they've done a lot of diverse activities in their life that show that they are overachievers and they like to win despite the odds.  Dangerous candidate: The dangerous hires are "typically the most brilliant people." They are the ones who are so brilliant that they think everything they believe is correct. They think there's no way they are wrong even when presented with conflicting information. Dangerous candidates can sometimes be "reckless in their social life." "In our business, you're not supposed to connect social life with business life, but I find that to be irresponsible not to look at both. Someone who is reckless in their personal life, it's highly unlikely they aren't reckless in their business life."  Nuisance candidate: A nuisance hire is someone who is neurotic. (Karp admitted that he's neurotic too). According to Karp, though, when someone is too neurotic "all they are is a drag. They are toxic. They constantly complain about everything not being their fault. Everything is the fault of someone else. Everything goes the wrong way." 

This screening system has been helpful in how he's been able to cultivate and grow talent.

"Additionally, it's helpful on how to manage them," he said. "Some people are push, some are pull. Some people actually respond better to criticism and some respond better to a carrot.  

Karp, 38, launched Tourbillon in 2012. He previously worked as the co-chief investment officer at Dallas-based hedge fund Carlson Capital and before that he was a portfolio manager for CR Intrinsic, a subsidiary of Cohen's SAC Capital Advisors (now renamed Point72 Asset Management). He began his career at George Weiss Associates after graduating from the University of Pennsylvania in 1998.

Watch the full interview below: 

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