Damsel in Distressed is an enjoyable biography. Candid and unapologetic, Mielle takes us through her roller-coaster career in distressed investing (a.k.a. “special situations”), from entry-level analyst to being a partner at a large hedge fund.
In distressed investing, the edge comes from knowing more about a given situation than anybody else – doing deep fundamental research on the underlying business, having a rigorous technical understanding of the various securities related to the situation (few of which are publicly traded!), then combining this with dealmaking, control and leverage. As Matt Levine half-jokingly says, distressed investing is about being part of the 51% of debtholders to take the entire pie, leaving nothing for the other 49%. Few other hedge fund strategies combine fundamentals, technicals, and game theory in quite the same way. Mielle conveys the subjective experience of a distressed investor with lucidity, giving a sprinkling of technical details for the keen reader (e.g. the discussion of equipment trust certificates).
I also enjoyed Mielle’s discussion of the history of the hedge fund industry. She outlines the importance of David Swensen (the late former Chief Investment Officer of the Yale endowment) in catalysing the growth of the HF industry and discusses her experience of the increasing levels of competition – I often hear about this in the abstract, but Mielle examines how it manifests in the day-to-day life of a hedgie.
What makes Damsel unique relative to other books/biographies about investing is Mielle’s discussion of her experiences as a woman in a male-dominated industry. We sometimes like to say that the HF industry is a true meritocracy, not caring about any factors apart from alpha generation. But that’s a broad statement made from a position of privilege; Mielle’s voice is a necessary counterpoint. She blends subjective experience with rigorous evidence, citing studies showing, among other things: women are penalised more harshly for errors, men are more likely to commit misconduct but women are more likely to lose their jobs as a result of misconduct, men take more risk but don’t make more money!
Damsel in Distressed is a worthwhile read for anyone in the industry.