- Mala Gaonkar has led Lone Pine with Kelly Granat and David Craver since Stephen Mandel Jr. retired.
- She’s also active outside of investing, working with the likes of David Byrne and Malcolm Gladwell.
- Insider dove deep on one of the industry’s more interesting characters.
- See more stories on Insider’s business page.
An upside-down investing landscape requires an outside-the-box thinker.
For decades, asset managers have been able to stick to somewhat static definitions of what value and growth investments are, helping them categorize and hedge their investments.
But the investing world has become more and more detached from its old-school fundamentals. This year alone we’ve seen a single deli in New Jersey worth millions in the public markets and a video-game retailer becoming the center of Wall Street’s attention when it nearly brought down a top hedge fund.
For stock investors nowadays, thinking about what the future looks like might be more important than the company’s current performance. In essence, that means copying what Mala Gaonkar and Lone Pine have been doing for years.
Gaonkar is one of the three-person team running $30 billion Lone Pine Capital, alongside Kelly Granat and David Craver, taking over the firm from the billionaire founder Stephen Mandel Jr., who retired at the beginning of 2019.
Gaonkar is the firm’s expert on the bigger picture. The 51-year-old is less interested in a company’s latest earnings release and more focused on what trends will be dominating the world in a couple of years’ time, sources who have worked with her and invested in Greenwich-based Lone Pine told Insider. A great example comes from her appearance at last year’s digital Milken Conference, where she walked through how Facebook — long thought to be the quintessential example of a growth company — should be considered a value play now.
The London-based Gaonkar develops her worldview not just from her time in the office with her team of analysts but outside of work as well, where she’s funding arts projects, running public-health nonprofits, and creating interactive exhibits with the former Talking Heads frontman David Byrne.
Through interviews with past coworkers, investors, arts partners, industry experts, and more, Insider dived into what makes Gaonkar — a mother of two in an industry dominated by men and an Indian woman in an overwhelmingly white space — a trailblazer, from her investing prowess to her passion projects away from the office.
“In whatever field Mala’s working, she asks interesting questions. Whatever she is looking at, she’s thinking about in a broad way,” said James Lingwood, the codirector of Artangel, where Gaonkar was formerly a trustee.
Lone Pine declined to make Gaonkar or other executives available for interviews for the piece.
Taking over for a legend
Gaonkar, who was born in the US but grew up in Bangalore, India, chose to study economics at Harvard despite coming “from a long line of rural Indian doctors.”
“I was the family black sheep,” she joked in a W Magazine profile from 2017.
After getting her bachelor’s degree in 1991, she worked for Boston Consulting Group in the firm’s Munich and Hong Kong offices before returning to Cambridge to get her MBA at Harvard. She graduated the same year as her husband, Oliver Haarmann, who is the founder of London-based private-equity firm Searchlight Capital, after working as a partner for KKR.
She then worked in private equity after her MBA as an analyst for Chase Capital Partners for two years before joining a young hedge fund run by one of Julian Robertson’s former analysts in 1998.
While Tiger Global and Coatue might get more attention, Lone Pine has been the best-performing Tiger Cub of all time according to LCH Investments, which tracks historical hedge-fund returns. Since the fund’s inception, it’s returned $42.3 billion to its investors — the third most in history behind only Bridgewater and George Soros’ now-closed fund.
Respect for Mandel — the investor and the person — is widespread; in a Barron’s story on the billionaire’s retirement, Robertson, Mandel’s old boss, called him “one of the most competent analysts and best people on the planet.”
Gaonkar, Granat, and Craver have filled the big shoes left by Mandel admirably, though, adjusting to the current market realities. Last year, the firm returned 30% in its flagship fund, and its long-only fund was up 46% as Gaonkar and her team bet on which companies would thrive in a post-pandemic world. The flagship fund roughly tripled the performance of the average fund’s returns last year, according to Hedge Fund Research.
So far in 2021 the going has been tougher, as the manager fell by as much as 10% in the first quarter.
While the firm isn’t as big of a player in the private markets as Tiger Global, Coatue, or D1, it told investors in mid-2019 that it would open up the long-only fund to private investments as more attractive opportunities began to emerge, a move that has paid off thanks to the lofty valuations in the private space. A recent Wall Street Journal story notes that the firm has increased its share of the portfolios dedicated to private companies from 5% to 15% this year.
Investments in 2021 have included the most recent funding rounds for the salad chain Sweetgreen, the corporate credit-card company Brex, and the content-creator subscription service Patreon. The firm’s past winners include Uber, Snap, and Chewy.
Public-equity investors meanwhile have struggled to make sense of valuations in a world where Tesla is worth more than every other automaker and tech companies have no earnings. Nowhere has this divide been acute than in the value vs. growth debate.
While many asset managers have stuck to outdated definitions of what value or growth companies look like, Lone Pine’s managing team has pushed outside the box.
At the aforementioned Milken Conference in October, Gaonkar argued that “some of the growth sectors actually look like very good value if you actually believe in the duration of growth that has been pulled forward by COVID-19 and the respective push that has been given to certain areas of tech.”
In a letter to investors in late 2019, the firm cracked the lid more than usual when Gaonkar, Craver, and Granat outlined how companies in outdated industries shouldn’t be considered value investments just because their earnings look solid.
“The backward-looking nature of factor investing thus overstates the value of ‘value.’ Past is not prologue,” the trio wrote.
This line of thinking is a part of the intellectual capital the trio has accumulated over decades of investing — how Lone Pine is able to set itself apart from other funds in a crowded marketplace.
“The idea of what is value and what is growth exists in the investor’s mind,” said George Patterson, the chief investment officer of Prudential’s quant arm, QMA.
“The economy evolves. It’s not something that is taught in a classroom. What and how the market is valuing something is what is most important.”
‘Do you have the guts to deal with volatility’
While her title at Lone Pine is officially portfolio manager, Gaonkar’s self-given title of trend-follower, in online bios and past articles on her work, is accurate, former investors and colleagues say. While she’s obviously a talented financial analyst — you don’t graduate from Harvard Business School and spend two decades learning from Mandel without becoming a well-versed numbers cruncher — it’s her ability to project where the world is going that sets her apart.
“She’s proven to be one of the few to not only recognize a trend but stick to her top-down views,” said one former investor.
“It’s difficult to find someone with that staying power. Do you have the guts to deal with volatility and maintain your positions and maintain your conviction?”
People have described Gaonkar’s partnership with Granat as a perfect pairing. Granat has earnings figures memorized while Gaonkar thinks about companies in a macro sense.
The trio of Gaonkar, Granat, and Craver splits different sectors among themselves. Gaonkar is responsible mostly for media, tech, telecom, and emerging-markets financial companies, while Granat’s main focus is consumer companies. Craver handles companies in the business services, healthcare, industrials, and financial sectors.
The three of them managing the firm’s flagship long-short fund and long-only fund, and like many hedge funds, big bets on well-known tech names are common.
It’s a sector where companies’ earnings don’t matter as much as their promise, and the firm’s five biggest holdings are Shopify, Coupa Software, Microsoft, Groupon, and Netflix, according to regulatory filings from the beginning of the year. Lone Pine is also heavily invested in Facebook, Adobe, and Snap, among other Silicon Valley favorites.
This type of thinking bleeds into her work outside of Lone Pine. In an interview with local Bay Area publication The Almanac for a project she did with Byrne, who she met through musician Brian Eno, she remarked how “context determines much of how you see the world” in reference to the pair’s illusion-filled Theater of the Mind exhibit.
The context she is working in is one that’s stacked against her.
Female portfolio managers in the hedge-fund industry are rare, and funds run by women are even rarer. Less than one out of every five employees in hedge funds is a woman, according to the research firm Preqin, and the numbers are even lower at the executive level. At Lone Pine, the three-person management team has not one but two women.
Gaonkar isn’t just managing a sleeve of the portfolio by herself either. She co-leads an 11-person team of analysts. For women entering the industry, that can be eye-opening, said Amanda Pullinger, CEO of 100 Women in Finance.
“For most women on the investment side, they tend to be the only one. It can be a very lonely place,” she said. “It’s not just about having women at the top but having them visibly engaged. It completely shifts the perspective of these young women.”
Her back garden
Gaonkar might be the most interesting person in hedge funds — a major claim for an industry full of big personalities and even bigger wallets.
Her family might have wished she’d chosen medicine over economics decades ago at Harvard, but Gaonkar has done a lot for the field. She’s founded two nonprofits dedicated to public health, Surgo Foundation and Ariadne Labs.
Surgo, which she founded alongside the Gates Foundation veteran Sema Sgaier, Malcolm Gladwell, and her husband, set out to solve the sanitation crisis in India, she said in the 2017 W Magazine profile, but it soon expanded to a variety of projects.
If you want to see her work in-person, the Theater of the Mind production is set to come to Denver this year after being postponed by the pandemic. Byrne warns attendees that it made him and Gaonkar “rethink some of our own beliefs and assumptions, to see ourselves and the world in a different way.”
It pulls stories from their own lives, the production’s website states, to create a mind-bending experience.
“Mala and I have been fascinated by the science behind these experiences for a number of years, and though reading about the phenomena involved is exciting, I sensed that it’s one thing to read about something and quite something else to actually experience it,” Byrne wrote on the production’s website.
Beyond creating her own art, Gaonkar is also a major contributor to the space as a donor, advisor, trustee, and more. The Paris Review, the Tate Gallery, Artangel, and more have all counted her as a board member or trustee at some point.
“She was inquisitive about our philosophy and ambitions and decisive with her philanthropy,” said Lingwood, of Artangel, a nonprofit arts organization that funds projects in the UK.
“She’s discreet and precise, not showy at all, which is appreciated when you run an arts organization.”
Allocators can sometimes be wary when their managers start taking on projects outside of work, but for Gaonkar, exposure to other fields and people is important to understand the trends shaping the world — and how technology companies will address them.
Plus, it’s good to have hobbies.
At her 25th anniversary for the Harvard undergrad class of 1991, she was asked to be a panelist not on finance or investing but about storytelling with the movie director and fellow Harvard grad Darren Aronofsky. The name of the panel: “Do Stories Matter?”
“I think it’s important to have things that you explore and indulge intellectually that are separate from your work,” she said in the 2017 W Magazine profile.
“Everybody needs a back garden.”