#18 – Damsel in Distressed
Dominique Mielle had an illustrious career as a distressed debt hedge fund manager at Canyon Advisors in LA.
Dominique Mielle had an illustrious career as a distressed debt hedge fund manager, including building a $5bn CLO business from scratch at Canyon Advisors. She retired from hedge funds, wrote a book, amusingly titled Damsel in Distressed, about her story to inspire women to follow her lead. In this interview, she talks about why there are not more women in hedge funds and in investing more broadly; about the complexity of the distressed debt business; and about being a woman in a man’s world.
GETTING INTO INVESTING
Dominique studied in Paris and took a job in New York. Years later, she attended business school and took a course in investing, discovered her passion and decided that was what she wanted to do. That course was given by Bill Sharpe, famous for the Sharpe Ratio. That led to her taking a job with Canyon Partners, which lost half its assets in the Asian crisis as she joined. She turned down Jeff Bezos’ offer to be his 15th employee to take that job. But Canyon went on to grow to a $25bn business and Dominique carved out a unique role in distressed debt.
WOMEN IN FINANCE
In her book, Damsel in Distressed, Dominique writes “Investing is highly creative and requires imagination, ingenuity and guts” which I think is a great summary. She goes on to point out that women have all these qualities in equal quantity to men. Many studies have shown that diverse teams make better decisions, yet Mielle feels that women are under-represented as hedge fund founders tend to be male and employ members of their own tribe – people that look like them and think like them. As a consequence, young women don’t see successful women in hedge funds, which makes it difficult to envision this as a possible career path.
WOMEN HAVE TO BE NICE
She doesn’t tend to yell but can act quite mean. …”..these moments of impatience are rare and stem from legitimate reasons, such as dealing with incompetence or absurdity, having to repeat oneself, being told what one already knows, or waiting” is how she describes herself in the book. At work, if she got impatient or angry, she often got a reaction “don’t get emotional”, to which she would respond, “I am not emotional, I am angry, feel the difference?” Mielle believes women walk a fine line between being assertive and being nice – not being nice as a female professional, she believes is what will really damage your career.
MARKETING IS UNDER-RATED IN HEDGE FUNDS
Mielle was paid more than the Head of Marketing, the only other senior woman at Canyon. She thinks this was wrong. Large hedge funds have not beaten the market in the last decade and Mielle thinks that an important reason that investors still allocate to these large funds is the marketing. She thinks that the hedge fund business is like any mature industry – what makes the difference is the packaging or the marketing. You don’t buy Gucci sunglasses because you can see better with them, she quips. And she thinks it’s the same for large funds like her former employer where it’s the marketing that makes the difference, and marketing people should get paid more.
Steve’s note: I disagreed with much of what Dominique asserted in this episode but the purpose of the podcast is to learn, and you are much more likely to learn from listening to a different viewpoint. Maybe there are marketing geniuses in large funds who are persuading people to allocate their money, but I have never met one, and even if I did, I am not sure I would be persuaded that they merited similar pay to the front office, if performance were good.
DISTRESSED VS EQUITY INVESTING AND ITS FUTURE
Valuation is a similar skill but distressed is more complex. Mielle believes that we could be on the cusp of a really interesting window of opportunity in distressed – typically distressed bonds trade at the risk free rate plus 1000 bps. So if treasuries get to a 5% yield, distressed could offer 15% which is really attractive. Of course the opportunity will be there for new investors and existing distressed investors will suffer. She also makes the point that many young investors in their 30s have no experience of investing when treasuries yield 4-5% so they are facing a completely new scenario.
Steve mentioned that the Getty Museum was the only museum he likes in LA. That’s not strictly true. He visited the Petersen Museum this summer and it’s one of the best car collections in the world. Dominique mentioned the Getty Museum and The Norton Simon Museum. (Image courtesy Getty Museum.)
Dominique Mielle is a former Partner and Senior Portfolio Manager at Canyon Capital and the author of “Damsel in Distressed.” She is a director of mortgage REIT ReadyCap, Studio City International, a Macau casino, speciality insurance player Tiptree, wireless operator Digicel Group and Osiris Acquisition Corp. She was also a director of PG&E and chaired the audit committee during its bankruptcy process.
Dominque has written a book about her career in distressed debt, appropriately titled Damsel in Distressed.
She finds most finance books quite dry, but enjoyed Liar’s Poker.
Black Edge: Inside Information, Dirty Money, and the Quest to Bring Down the Most Wanted Man on Wall Street is the book which apparently inspired the series Billions and tells the story of the investigation into Steve Cohen and SAC.
HOW STEVE KNOWS THE GUESTS
Steve was concerned about the low percentage of women listeners to the podcast (and a similarly low percentage of women taking his online investing classes). He asked why on social media and Ben Yeoh suggested that he should get more women as guests, having only had Lucy MacDonald in his initial series of 5 shows. Steve went back to Twitter for suggestions, Dominique’s name came up and she kindly agreed to come on the show. Steve continues to want to push for more women in investing and would be delighted to hear other suggestions for women guests.