Book Review: Damsel in Distressed

Damsel in Distressed: My Life in the Golden Age of Hedge Funds. 2021. Dominique Mielle. Post Hill Press.

In Woman in distress, Dominique Mielle educates and delights with a fascinating memoir of her life, not only as a disciplined and accomplished financial professional, but also as an exceptional leader among hedge fund performers and innovators. None of this is evident as the book begins, when he describes his early years in the industry and dazzles the reader with all the opportunities that in those days represented low-hanging fruit for hedge fund investors. Not only were the opportunities exciting for her; they contrasted dramatically with her earlier, grueling daily experiences as an investment banker, which inspired her to attend business school at Stanford in hopes of moving on to better prospects.

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Mielle landed at Canyon Partners, LLC and thrived there for 20 years, facing a host of investment challenges, from the wild ride of late 1998-2001 to the global financial crisis of 2007-2008 and beyond. His career parallels the rapid growth of hedge funds, but he adds a distinguishing factor: a great ability to identify opportunities where no one else looks, which arose from having served as an analyst in many situations and industries.

Mielle tells vivid stories of analysis across industries and multiple failures that will delight analysts, even though many of the companies are gone for good. He honed his financial creativity through relentless analysis of situations, including rigorous risk assessment, and clearly identified situations that were not correlated with any market or interest rate. Readers will be pleased to know that Canyon management understood their assumptions and recognized their potential to produce a profitable institutional product.

Mielle provides an excellent perspective on the evolution of the hedge fund industry. On the one hand, it clearly addresses its emergence and initial “name” players in the early 1990s. His explanations allow the reader to understand how these funds multiplied so quickly (until 2008). Hedge funds thrived on market and information inefficiencies. Some of us remember the pre-EDGAR days that ended in 1996. Before, we had to wait for companies to disseminate results or filings by fax or mail, and some operators invariably received these filings before others

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Mielle outlines the changes in compliance that challenged industry players over time, from Regulation FD (Fair Disclosure) in 2000 to the Dodd-Frank Wall Reform and Consumer Protection Act Street of 2010, which came into force in 2016. The latter legislation affected warranties. loan obligation (CLO) structures transforming a low-cost, capital-light CLO business into a low-cost, capital-intensive CLO business. Mielle solved this problem by inventing a special purpose equity fund that preserved the integrity and profitability of the CLO. Called a capitalized management vehicle (CMV), it retained the equity of the CLOs issued. CMV retained some of the risk, as required by Dodd-Frank, but was not capitalized with the company’s own money.

The author repeatedly addresses one theme: the glory days of hedge fund investing are over. Because? Up until about 2008, small, underperforming, nimble hedge funds could outperform and outperform the indexes substantially. Success, however, generated an increase in fund size, which became the enemy of outperformance. Competition increased, allowing investors to demand more advantageous and performance-based fees. Faced with shrinking profit margins, the hedge fund industry shifted in pursuit of asset growth rather than yield.

The book contains many vivid images without a single page of images. The first thing that will make many readers howl is the author’s encounter with Bill Sharpe. Mielle takes us back to the school days we’d rather forget with her description of the “Touchy/Feely” interpersonal dynamics course at Stanford. His experience in Brest, France, is a big surprise. She went all over the world, taking every meeting seriously, being meticulously well prepared, never complaining, but subjected to numerous humiliations big and small.

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Woman in distress stands out for a multitude of reasons. The book offers an authentic, first-hand account and chronicles a long, rising, and uninterrupted career at a single firm during the hedge fund industry’s fastest-growing period. Its author is a brilliant and broad-minded participant who is also one of the rare female leaders in the industry. She also proves to be tough, good-natured and resilient, both in and out of her career. I’m “anxious” to read it for one reason only: It’s the first major book I’ve read written by a female finance leader since Karen Firestone’s publication. Even the Odds: Sensible Risk-Taking in Business, Investing, and Life in 2016.

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All posts are the opinion of the author. Therefore, they should not be construed as investment advice, nor do the views expressed necessarily reflect the views of the CFA Institute or the author’s employer.

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Janet J. Mangano

Janet J. Mangano, formerly a senior portfolio manager at PNC Wealth, is based in Short Hills, New Jersey.

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