The Hedge Fund Investor with Dominique Mielle

Liz Tinkham (00:18):
Hi, this is Liz Tinkham and welcome to Third Act, a podcast about people embracing the third act of their lives with a new sense of purpose and direction. The third act begins when your script ends, but your show’s not finished. Today’s guest is Dominique Mielle, the hedge fund investor. Dominique grew up in France and strangely (for we Americans), she wanted to get out of Paris when she graduated university to actually anywhere that would give her a job. She’d landed in finance in New York City and then onto her MBA at Stanford. While there, she developed, as she says, a platonic crush on the brain of professor William Sharpe, developer of the Sharpe Ratio, which then led her to a career in hedge fund investing. She recently left that career after 20 successful years. And looking back, she realized that there was no one like her—meaning no women in hedge funds—then or even now. So she wrote a book, Damsel In Distressed, which debuts on September 7th.

Liz Tinkham (01:18):
The book helps to encourage more young women and men to pursue a career in hedge fund investing. In her pretirement, as I like to say, she serves on five company boards, mentors other women, and plays a mean game of polo.

Liz Tinkham (01:34):
Dominique, welcome to Third Act. Wonderful to have you.

Dominique Mielle (01:37):
Thank you for having me.

Liz Tinkham (01:39):
So you are the first person I’ve ever interviewed who actually plays polo in their third act. Is this something that, and I think I caught you the first time I talked to you, either coming or going… is this something you’ve been doing for a while?

Dominique Mielle (01:52):
Not long enough. I started in my forties, which by everyone else’s standard, is kind of a new thing. Most people have been riding since childhood and I didn’t have that opportunity or that advantage. So I’ve been trying to catch up, but it is a real passion and it can be all-consuming in terms of time and money, actually.

Liz Tinkham (02:20):
I bet. I bet. And we will come back to that because I think that’s sort of more of a third act thing, but just to get started, you’re the second guest I’ve had who’s been from France. So, I’m starting to think that the quality and the work ethic of the women there must be just terrific. And I think my friend Chantal, who was four episodes ago, would agree. But I always like to start by asking my guests sort of what was their first act, where’d you go to college and what did you expect to do when you came out of college?

Dominique Mielle (02:48):
So I was born and raised in France in the suburb of Paris. So, that’s where I went to college. And frankly, I didn’t spend much time thinking about what I would do later. I can’t say that I had very specific aspirations. I was an ambitious kid. So, I did think I would be something very special. I suppose most kids do. But certainly I had no inkling that I would be in finance. I had no interest in finance, as a matter of fact. And so the reason that my first job was in finance on Wall Street is not because it had anything to do with finance, but because it was in New York and that I wanted to travel and see the world. But I didn’t have what the media sort of typically assigned to a hedge fund investor, which is a very early calling from the God of Money to start trading when they’re in their crib or shortly after.

Liz Tinkham (03:55):
So you went into finance in New York and how did you end up there? Was it just where you got a job or did you specifically target it?

Dominique Mielle (04:03):
I specifically looked for a job abroad. The one job I really wanted was actually in Tahiti and it was a sort of pretend job doing very little for a short-term period that would have led to, I’m sure, absolutely nothing. But it was in Tahiti, in Polynesia. So I thought, what a fabulous opportunity. And then reason sort of set in. And when I got another job from a French bank doing credit analysis in New York, I thought, New York is actually… it’s good enough. It’s not the exotic lifestyle that I had in mind, but it’s kind of legit. I guess I’ll learn something. And at least I’ll be out of France, out of Paris, and meet new people and see new places. So, that’s what I did.

Liz Tinkham (04:53):
It seems so funny to say you wanted to leave Paris, because I think most Americans would just kill to go to Paris. But I think it’s all in what you’re used to and where you’ve grown up. Right?

Dominique Mielle (05:03):
Paris is wonderful. In fact, when I go back now, I really wonder why I ever left. And I encourage every American to come and at least visit Paris. I mean, it’s a crime not to in your life. But I simply want it to be elsewhere. You know, I’m a generally curious person and I always think that there are new things to look at. So , I’m a little bit restless.

Liz Tinkham (05:33):
So, less exotic, but when I got out of college in Ohio, I thought, anywhere but Ohio, I’m not staying in Ohio. So I ended up back in Chicago. But all right. So you’re in New York, you’re working in finance and then you end up going to Stanford for business school. How did you get into hedge funds? I mean, when you and I first talked, I’m like, I think you’re the first person I’ve actually ever met who’s worked at a hedge fund.

Dominique Mielle (05:55):
I’m not surprised because hedge funds at the time when I started were very unknown, secretive types of companies. It was a very small industry. They was really a starting industry. Look, my interest in the buy side, as we call it, i.e buying securities, came late and it came while I was in business school. I had sort of a vague idea that it would be very cool to sit on a trading floor and be sort of the female Gordon Gekko of some sorts and investment banking was—especially at my level, I was a lowly analyst—it was far, far as from that cool image. But at Stanford, I had two classes that really drew me in. One was taught by Bill Sharpe, who was a Nobel prize in economy and the inventor, obviously, of the Sharpe Ratio. I loved him. And when I say I love him, I really did. I had a crush on him, enormous. That’s the right—

Liz Tinkham (07:02):
Now were you married at the time or no?

Dominique Mielle (07:04):
No, but he was.

Liz Tinkham (07:05):
Okay.

Dominique Mielle (07:05):
Very much so. But that didn’t stop my feelings, platonic obviously, but unbridled feelings of adoration for professor Sharpe. In the process, I discovered a real interest in investing. So after graduating in ‘98, I looked for a job in finance and more specifically in hedge funds. And these were very difficult to find because obviously those companies were not recruiting on campus. I don’t think they are now, maybe the big ones are, but these were scrappy small companies that were really under the radar. And then remember that back in ‘98, the cool thing to do was to go work in the internet. That was the new thing. So, all my classmates were talking about www and the net and everything else. And I was the uncool student who was adamant that she wanted to work at a hedge fund. And I found this little company called Canyon Capital in Los Angeles. There were maybe 10 people and $500 million in assets. I loved the guys. I thought, this is going to be a great venture.

Liz Tinkham (08:35):
At that point were there, I mean, were there any women there, did you know any women who were in hedge funds?

Dominique Mielle (08:40):
No. And I didn’t know anybody who was in hedge funds, period. That was the idea that I had for myself, but I had never even met a hedge fund manager.

Liz Tinkham (08:50):
Did Mr. Sharpe or professor Sharpe, did he encourage you to go do hedge funds? I mean, did anybody say, oh, you can’t do that? Or they said, great idea, or?

Dominique Mielle (08:58):
No. I didn’t even ask anybody. It didn’t occur to me. And this was some decades ago. I think the concept of mentoring and particularly for a French person where the education system is or was at least, very formal, the idea that a professor is more than somebody who teaches you during classes, who could be a mentor, who could be an advisor, was very foreign to me. So, no, I didn’t even think of asking.

Liz Tinkham (09:28):
You end up having a wonderful career at Canyon Capital, building up their CLO practice, which is what? You were explaining this to me.

Dominique Mielle (09:34):
The CLO stands for collateralized loan obligations, and it’s a type of investment vehicle that buys different loans in companies like Domino’s, Pizza Hut, Best Buy. And then it finances the loans by issuing bonds and equity to different investors.

Liz Tinkham (10:02):
Now, you retire in 2018. Why did you decide to do it then?

Dominique Mielle (10:07):
So, it had been almost 20 years of working with Canyon and the industry changed very drastically in those 20 years. I think these were really the golden years of the business. I think now the hedge fund industry is very mature. It’s very competitive. If you think of an S curve for any industry, I think it’s probably on the flat part of the S. So everything is different, competition, correlation and particularly the size and the scale of hedge funds. So if you think of Canyon, this is now a company that manages $25 billion in assets and probably has 250 people. So the thrill, the entrepreneurial spirit is no longer there. I think there were a lot of other positive aspects that have replaced it, but, for me, it was time for a change. I had become a partner in 2012. So, I had built wealth. I had built a title. And I think that was just about as far as I could take that lead. So it was time for a change and change every 20 years is probably a good thing anyways.

Liz Tinkham (11:28):
Yeah. Yeah. Did you know what you’re going to do next?

Dominique Mielle (11:31):
I did not.

Liz Tinkham (11:32):
And you said to me that retiring and losing your identity caused you some angst in that you didn’t know how you’re going to introduce yourself. So, and that happened to me as well for the first year, I was like, I don’t have a card anymore. It doesn’t have my big lofty title on it. Have you dealt with that?

Dominique Mielle (11:48):
So the angst came mostly before I stopped working. And, as you said, first of all, it is the biggest chunk of your day, right? No matter how involved a mother or a wife, there are only 24 hours in a day, hopefully eight or nine of which you’re sleeping. So if you’re spending 12 hours at work, which I think is a reasonable… I came in at 6:30, I left at 6:30. That’s not a very long day, but that was what I did. And that sort of becomes who you are and how you introduce yourself. And let’s face it, I thought I was a pretty big deal when I said… I thought, look at me, a partner at Canyon Capital. And the circles I was in, they valued that title. They did think, I think, that it was a pretty big deal too, when I introduced myself to them.

Dominique Mielle (12:48):
Of course, once you stop working, you have different sets of friends and social acquaintances and you make new friends and you do other things. And so really the fact that you are a hedge fund or you were a hedge fund manager has no importance at all. So, I think self-deprecation is important to realize that you’re not that big a deal. It doesn’t matter that much. And most people would rather talk about themselves than about you anyways. So it doesn’t matter.

Liz Tinkham (13:23):
And most people don’t really understand what a hedge fund does.

Dominique Mielle (13:25):
And there’s that.

Liz Tinkham (13:29):
When I was working and my kids were in grade school, and I lived in my town, right. We’d have parties, have couples and everything, and I’d start like… usually the women would be sort of one group and the men on the other, and I’d start to try and explain to one or the other group what I did, and then everybody’s eyes would roll. Like what? Let’s not really talk about that tonight.

Dominique Mielle (13:51):
Exactly. This small-talk question. You don’t really have to ask that. I had the same feeling when somebody would ask me about a trade. That was so exciting to me. And it was quite obvious after a minute that really nobody cares. The point was well made by my grandfather, bless the man, but he asked me once what I did for a job. And I said I worked for a hedge fund. I worked in finance. And he said, aha, do you sit or do you stand? And in his mind I worked at a bank and in banks most tellers are standing at a window making change or giving you… So he thought actually, I was a clerk at a bank. And I said, no, grandfather, I sit. That was really something very positive about his granddaughter that I said. So he was very pleased with my trajectory, career wise.

Liz Tinkham (15:07):
You have a really interesting chapter in your story that I’m going to call sort of act 2.5, where you become a member of the Pacific Gas and Electric board.

Dominique Mielle (15:15):
That’s right.

Liz Tinkham (15:16):
That was an interesting chapter because your cohort was appointed as sort of the fixers of the PG and E board. It was sort of post some pretty bad fires, if I remember correctly. So, talk about what you did. How did they find you? Because I think this might be of interest to other people who might be listening, that they might be called in to be a fixer. And what that’s like.

Dominique Mielle (15:39):
That’s right. These were the circumstances. The PG&E equipment was involved in severe fires in 2017, 2018. And the liabilities that went with that caused the company to file for bankruptcy early 2019, I think, and the sitting board was asked to leave and was replaced by a new set of some 15 people among whom I was one and the job was to restructure the company so that it can emerge as soon as possible from bankruptcy and participate as the biggest financier of the new California state wildfire fund put in place by Governor Newsom. So I had worked with a lawyer, a bankruptcy lawyer, who was representing the majority shareholders and he suggested my name. Some shareholders knew me from having worked together on bankruptcy cases, stress and distressed cases as a hedge fund portfolio manager. So I sort of knew the cast of characters.

Dominique Mielle (16:50):
And I went in with a bunch of other people and the job was, try to set the company straight so that it doesn’t linger in bankruptcy and it’s a functioning company.

Liz Tinkham (17:03):
Did you get the job done?

Dominique Mielle (17:04):
The job got done. The company emerged on time with a new plan, a new capital structure, and having satisfied all its liabilities, including the claimants’ litigation claims.

Liz Tinkham (17:18):
And then you were replaced, right?

Dominique Mielle (17:21):
Correct.

Liz Tinkham (17:21):
That cohort was then replaced. Right.

Dominique Mielle (17:21):
Correct.

Liz Tinkham (17:22):
Right.

Dominique Mielle (17:22):
It was such an interesting set of circumstances because if you think about it, success for us meant that we got sacked and replaced, fired. So I never worked so hard with the stated objective that if we met the goal, it was very likely that we would be asked to move along and be replaced by a new set of directors.

Liz Tinkham (17:49):
And I think you mentioned that it paid very well, right?

Dominique Mielle (17:51):
Oh yes. For the number of hours, I mean it was clearly below minimum wages for sure, for a good year and a half.

Liz Tinkham (18:03):
Wow. Now, would you ever do something like that again?

Dominique Mielle (18:05):
Oh yeah. In a second.

Liz Tinkham (18:06):
Okay. If somebody… and I know other people have been approached to do something like that, which I think is in some ways maybe not public service, but maybe a little bit there… but how might you advise to look at a situation like that?

Dominique Mielle (18:20):
I think it’s fascinating. It’s an immense learning experience. You get to work with really complex problems. It’s a puzzle where you have to fit the capital structure, the business, the liabilities, the bankruptcy constraints. It’s sort of a strategy game where you have to contend with the shareholders, the creditors, the governor’s office, the California regulators, management of the company, the unions. So intellectually, it’s absolutely fascinating.

Liz Tinkham (18:58):
Yeah.

Dominique Mielle (18:58):
This one had the added difficulty that it is a heavily politicized and media scrutinized process. The company is not well-liked, that’s, at least you could say in the state and the board that was the slate of directors I was part of was quickly and heavily vilified by governor Newsom as being the SOBs of hedge funds and ripping off the plaintiffs and wanting to make money for the shareholders, et cetera, et cetera. So, I mean, it was at times hard to work that hard for that little money, and being called names in the process.

Liz Tinkham (19:44):
Right. Right.

Dominique Mielle (19:44):
So it was, at times, tempting to just say, the hell with it. I’m not doing this anymore. And actually, a couple of board members quit. They just—

Liz Tinkham (19:55):
Oh, during?

Dominique Mielle (19:56):
Yeah.

Liz Tinkham (19:56):
Wow, wow, wow. Okay. So now you have a book coming out on September 7th.

Dominique Mielle (20:06):
I do.

Liz Tinkham (20:07):
Congratulations. And I love the name, Damsel In Distressed. Tell us about the book.

Dominique Mielle (20:11):
The book came out of my observation late in the game, after 20 years in the hedge funds, that not only were there no women in hedge funds, but because of that, for a young woman or young professional, there was no one to look at as a successful model or path to sort of engage in that profession. And so, yeah, I mean, it’s well-known that what you can’t see, you can’t be, as the feminist said. So I thought, I had a wonderful career. I’m grateful to Canyon and the founding partners. It was great fun. Let me write the story so that if at least one or two women are inspired to try their luck at it, that’ll be progress. I mean, in my 20 years I’ve met one female partner only. I’m not saying there’s one, there are others. But in distressed, I met one and she’s a friend of mine.

Liz Tinkham (21:15):
In your 20 years, did you have women come to your firm who were coming up or did they quit or what happened?

Dominique Mielle (21:20):
I think there are more women at the junior level who then move on. There are a few to begin with. So the ratio, the mix of women to men is much, much worse on the buy side, particularly in hedge funds, versus lawyers or bankers or consultants. And then as you go up in seniority, in many (if not most) jobs, women disappear.

Liz Tinkham (21:48):
Well. Okay. So let’s just say factoring out for attrition related to being a mom, maybe want to stay home or that type of take care of kids. I mean, so many industries have, in some ways, not fully crossed over the line where you now start to see more and more senior women. I mean, what’s going on there, what’s holding women back?

Dominique Mielle (22:08):
I think it’s as usual different things. One is, I think women don’t think of finance and investment as a viable path because there are no voices saying, you can do that. As there are in media and tech, in VC, you have a few women who are very vocal and very media savvy saying, you can lean in, you can all pride media. In most, even male dominated industries, you can’t think of one woman who’s sort of leading the charge and inspiring. I’d be hard pressed to think of one in finance, maybe Kathy Wood is one. But she came up just two or three years ago. She didn’t exist when I retired. So that’s a factor that you don’t have anyone leading the way and showing that it’s possible. And in many ways I hope my book will do that in its modest way.

Dominique Mielle (23:13):
And the other is that hedge funds have been, up until let’s call it at least a few years ago, immensely successful at making money for investors, but mostly at making money for themselves. And so if you have a winning structure, the impetus to change it and say “We need fresh ideas, we need new people, we need diversity,” that impetus is just not there. Why would you do anything? So men are doing this and they’re hiring the people they know, and they feel comfortable with, who happened to be men. That makes perfect sense. What’s changing, I think, is in both ways, one is investors, large institutions are starting to ask for diversity, forcefully and really rank and grade their investments and their hedge fund managers by the diversity of their investment team.

Dominique Mielle (24:12):
And two, hedge funds have been underperforming the market, or at least not outperforming the market for several years now. And so I think there’s at least the idea that maybe we need a new engine, a new motor, a new structure, something that rejuvenates the business. And I think having something else than 10 Harvard white male graduates in your investment team might just be the ticket to do that.

Liz Tinkham (24:47):
So what was it like write and publish a book? I have another friend who wrote one. But I know people that I’ve talked to on this show have been thinking about doing it. What was your experience?

Dominique Mielle (24:56):
Writing it was very pleasurable, very fun. I worked with a wonderful writing coach who helped me structure the story. So, that was great fun.

Liz Tinkham (25:09):
How long did it take you to write it?

Dominique Mielle (25:11):
A year? The point that’s a lot less fun is that then you have to find an agent and the agent has to pitch your book to a publishing house. Finding an agent is very difficult and you are going to face, at least I did, a large number of rejections. Nobody has fun being rejected and being said no to. And then the agent, once you get one, if you get one, has to find a publishing house who accepts to take on the book. And then once the book is bought by a publishing house, most of those publishers, at least for people like me who are first-time writers, I’m not a famous person, I didn’t write a cookbook, and I didn’t write a self book either. Now, if you don’t have any of those three, it’s hard. And that means you’ll have very little budget for PR and it means you need to do lots of things yourself, promotion-wise.

Liz Tinkham (26:17):
Yeah. Okay. So just so people are listening. If you’re famous, check. If you’re a cookbook author, check. And if you’re writing a self-help book, all good.

Dominique Mielle (26:26):
Beautiful. Beautiful. That’s success right there.

Liz Tinkham (26:29):
Okay. So, but in spite of all that, it’s published. Have you seen the hardcover version of it and everything so far?

Dominique Mielle (26:37):
In PDF, I have. Yes.

Liz Tinkham (26:39):
In PDF?

Dominique Mielle (26:39):
Yeah.

Liz Tinkham (26:40):
Good. So on September 7th and we will promote that as we launched this. So five company boards, because you’re on multiple boards now, you’ve got your book coming out, you’re playing polo. Is all of this your third act or how else… And then, how do you introduce yourself these days?

Dominique Mielle (26:55):
That is my third act. And I introduce myself when people ask me what I do, I say, I don’t do anything.

Liz Tinkham (27:01):
But you do.

Dominique Mielle (27:04):
And then if they want to know more, then, depending on the setup of the meeting, I’ll explain that I either am a polo player or a board member or book writer. But I very much enjoy saying I don’t do anything. I don’t do much. I like to say that I spent half my life making money and I’ll spend the next half spending it, which is kind of true.

Liz Tinkham (27:31):
It’s kind of true.

Dominique Mielle (27:32):
It’s kind of true.

Liz Tinkham (27:32):
I love that. What a great life, what a great life to be able to do that. I always say, if you have time, talent, and treasure, what are you going to do with that? So, yeah, I thought about calling my podcast, I’m not done yet, because I feel like I’m not. So what aren’t you done with yet?

Dominique Mielle (27:46):
I’m interested in lots and lots of things. If I had time, I would start new sports. I would travel even more. I read a lot, which is an enormous luxury. I found that while I was working, it was hard to read and finish a book. And now if I want to read until three in the morning, I just do, thinking I’ll just wake up late tomorrow. And what’s the big deal?

Liz Tinkham (28:17):
Right. That was me last night. I’m reading one of those recommended beach reads, which I never have done, for years and years. And I was literally laying in bed at midnight, one o’clock and I’m falling asleep and I’m like, I’ve got to figure out, they’re about to get together. I’ve got to read it, right?

Liz Tinkham (28:31):
Well, anyway, so I can’t let you go without saying, favorite books? Just recommendation for our listeners.

Dominique Mielle (28:37):
My favorite book is Kim by Rudyard Kipling.

Liz Tinkham (28:41):
Oh, okay.

Dominique Mielle (28:44):
It’s an epic adventure of a young boy in India, discovering the world with a guru. India being under the rule of England and having something called the great game where England is spying on India. And it’s magnificent. It’s beautifully written. Reading is a great joy.

Liz Tinkham (29:11):
Well, I will pick that up as I finish up my steamy beach read. But thank you so much.

Dominique Mielle (29:15):
A different…

Liz Tinkham (29:16):
Yeah. Different. Thanks so much for a chance to talk with you and good luck with the book. We’ll publish everything in the show notes. Dominique, thanks so much for your time. And we look forward to the book release.

Dominique Mielle (29:26):
Thank you so much, Liz.

Liz Tinkham (29:30):
Thanks for joining me today to listen to the Third Act podcast. You can find show notes, guest bios, and more at thirdactpodcast.com. If you enjoyed our show today, please subscribe and write a review on your favorite podcast platform. I’m your host, Liz Tinkham. I’ll be back next week with another guest who’s found new meaning and fulfillment in the third act of their life.