#18 – Damsel in Distressed

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.

LA MUSEUMS

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.)