Pomegranate Capital Thinks Women Can Run Money Better, Is Wrong

by Johnny Debacle

InvestrogenSusan Solovay, a woman by trade, has started a fund of funds whose mandate will be to invest only in hedge funds run by women. Solovay is marketing this FoF on the claim that women manage investments better than men. (quotes from Business):

Solovay commissioned extensive academic research into the performance of hedge funds run by women and claims that it showed that women fund managers performed consistently better than those run by men.

Other examples of commissioned “academic research” show that:

  • Cigarettes taste great and are healthy
  • Lead is perfectly safe for the lining of our water pipes
  • Corn based ethanol makes any sense whatsoever for reasons other than padding the pockets of Archer-Daniels-Midland (NYSE: ADM) and making idiots feel better (wrongly) about the environment

More from the article:

She claims that the research showed that male-run hedge funds managers tended to shoot from the hip making big returns one year and poor ones the next.

So what Susan Solovay is saying is that the men she has been with have not had consistently “big enough” returns. In this case size does matter and obviously Solovay has not invested in Long or Short Capital. Along with our investment strategy of “not losing money”, we use the tactic of “making returns so big that the next year we can lose as much as we want, whenever we want”.

For non-abstract financial advisors and managers, performance problems are understandable and not infrequent. But these problems are not due to male analysts and portfolio managers alone. Women are involved in these funds too. If not where would the coffee come from? Who would do some of the back office functions and the bulk of secretarial work? And who would provide massages to male analysts and male PMs? And how would any large investment manager be able to adequately staff their investor relations department? Women are part of the performance of these funds and it is sexist to abdicate them from responsibility just because they are never put in positions to drive actual investment decisions or because nobody takes them seriously.

Recommendation: Setting aside my qualms about Ms. Solovay’s rampant sexism, Pomegranate Capital seems to be a dubious gimmick. As an investor, you have two layers of fees and you have a restricted pool of PM talent.

LoS has witnessed the success of our Satan’s Portfolio thesis against opposite minded strategies such as those embodied by PAX Fund and we see Pomegranate Capital as a similar opportunity. Although different in composition, we think a great play would be to go long the all-in return of the Vice Fund and short the all-in return of Pomengranate Capital, effectively creating a “PC spread” of sorts.

Related Reseach:

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  1. Cornelius
    February 13th, 2007 | 12:46 pm

    There are funds managed by women??

  2. JCauto
    February 13th, 2007 | 2:00 pm

    If she exercises the same care in selecting broads as fund managers as she does in constructing her website, I think we have a winner here.

  3. Anonymous
    February 13th, 2007 | 4:44 pm

    Do women begin to understand why they are not taken seriously when one of them names a fund, “Pomegranate Capital.”

  4. PBateman
    February 13th, 2007 | 5:43 pm

    Seriously, WTF are they thinking. There are only 4 or 5 HFs run by women that are even remotely respectable. (Note this is very different from “good”, or “investable”). Why the hell would someone intentionally invest in something that due to its own admission limits the set of funds it can choose from and thus will inherently provide lower returns?

    On second thought, if people want to lose money, don’t let me be the one to stop them. Invest away idiots.

  5. Aspiring Mini-Baller
    February 13th, 2007 | 6:56 pm

    Each day before I set about “killing it” and “getting it done” I think of pomegranate. I mean, is there a better source of folic acid and antioxidants?

  6. Notorious GDP
    February 14th, 2007 | 10:19 am

    Is it just me or does their logo look deceptively like a Poppy? This may explain exactly what they are smoking to think this business model is a good idea.

    n G.D.P

  7. The Corner
    February 14th, 2007 | 1:27 pm

    You guys are all wrong, get your seed money together for Pom Cap’s daughter fund, Grenadine Millenium IV, to make its IPO.

  8. February 14th, 2007 | 1:47 pm

    All my seed money would go to the Notorious G.D.P., which is a just a great great name.

  9. Zbignew
    February 16th, 2007 | 10:14 am

    I would use grandma’s dialysis money to go into a fund called Notorious G.D.P.

  10. HarlemHaberdasher
    February 22nd, 2007 | 6:50 pm

    It seems very possible that there is strong selection bias going on in the selection of women to run funds. Given the prejudices against them in finance, I’m sure a female senior analyst/assistant PM/whatever often has to outperform her male counterparts significantly in order to get the PM job.

    But if that’s the case, then investing in an FoF of funds run by women… might actually be a good idea.

  11. MKM
    September 28th, 2007 | 12:41 pm

    Er… there actually IS some evidence (real academic research, not a commissioned “study”) that women have more investment success than men.

    See Barber, Brad & Odean, Terrence. “Boys Will Be Boys: Gender, Overconfidence, and Common Stock Investment,” Quarterly Journal of Economics, Feb 2001.

    Barber is a finance professor at UC-Davis; Odean is a finance professor at UC-Berkeley.

    You can find a PDF here: http://faculty.gsm.ucdavis.edu/~bmbarber/

    However, other than all that, I personally think using gender as a manager screen sounds more like a marketing gimmick than anything else. How much you want to bet she targets the wealthy divorcee crowd?

  12. zb
    April 9th, 2008 | 11:36 am

    Do you make your all of your investments based on your rabid misogyny rather than silly things like “numbers”? What would that fund be called?

    I-Have-Mommy-Issues Cap ?


    The-Pretty-Girls-In-Highschool-Ignored-Me Cap ?

    Sign me up! That fund will surely outperform a fund run by the skanks over at Pom Cap.

  13. required (yes that's my name)
    September 19th, 2008 | 9:24 pm

    I happen to know Havens Advisors, a hedge fund run by Nancy Havens. The fund has excellent returns year after year. This is not a plain dartboard long/short fund she’s managing, it’s actually pretty a complex fund with complex investment strategies. Ms. Havens is a smart woman with bigger balls than many guys I know. I’m a guy and not for all the PC feminist shit, but you really can’t hold a candle to this woman…

  14. st0ckp1ck3r
    September 29th, 2008 | 3:55 pm

    In my experience – Money runs women better.

  15. AUM under AUM
    April 13th, 2009 | 8:16 am

    Considering that she, like many 2nd tier hedge funds, will be making money off of AUM rather than actual preformance, this looks like a winning strategy. While she will not be delivering any actual returns, she will be selling her investors a sense of dogoodertude and smugness which will prevent withdrawals for some time, allowing her to coast off of the 2% long enough to retire a rich woman.

    Long asset gatherers.

  16. July 4th, 2009 | 4:46 pm

    Two words: Nicola Horlick.

  17. Electriclynn
    November 29th, 2009 | 8:47 am

    Took a look at the Pdf report. Not all that impressed as the numbers can be SPINNED to benefit what ever you want to push… So Mrs. Susan is pushing women to lead.. Won’t happen, most are too lazy. Seriously, most women won’t work unless you start by cutting off the money supply (daddies who pay for their little girls into old age, men who marry women to stay home, alimony, shared custody instead of child support, etc, etc, etc.) that continues to feed the pampered poodle life-style. Take away the easy money & you will see a whole lot of women get off their backs and slip into some steel toed shoes and earn a dollar the good ole “Rosie” way….and yes I am not only a woman, but also a devoted single mother of four, you may call me Ms. Lynn. This is my free personal opinion. Take it for what it is worth, nothing.

  18. Elizabeth
    February 25th, 2012 | 10:48 am

    This is quite literally the most ridiculous article and comment thread I have ever read. Are you men really so afraid of a little competition that you have to kill it before it becomes a serious threat? I suggest that you spend less time bashing women and more time getting an education and getting out of your tiny elitist and anti-female bubbles. I am so embarrassed for your gender reading these comments…

  19. February 27th, 2012 | 12:45 pm

    You are LITERALLY the most ridiculous poster in this entire thread, Eliza. Literally! As successful men, we are always “killing it” so your implied suggestion — let’s call it what it is Beth, a rebuke — that we NOT “kill it” is offensive. Literally offensive. But the embarrassment you, Lizzie, feel for our gender (I usually fill out all Government forms that ask for my “Sex” as “Yes,” just to make it harder for the Government to know what my gender is. But I digress, I LITERALLY digress) is nothing compared to the embarrassment that we feel for not only your gender, but for your Common App safety school, and for your parents, and for that time you read A Modest Proposal and thought “Gee this Dr. Swift guy is practically the antichrist, how does he think can solve poverty and the ills of the underclass by eating their babies, I am so embarrassed for his gender, profession, language, countrymen, yadda yadda, et alia and cetera.”

    Mr. Juggles

    PS Chin up, the world needs coffee makers, too.

    PPS But it wouldn’t hurt to learn to type.