The industry's longest-serving managers share lessons they've learned
Following the deep market falls of recent weeks, the AIC has collated insights from some of the investment company industry’s longest-serving managers.
Out of all AIC member investment companies (ex VCTs) with a history of longer than ten years, 90 (46%) have had at least one of their current fund managers in place for ten years or more. Some managers have much longer track records. Eighteen investment companies have had the same manager for more than 20 years.
Annabel Brodie-Smith, Communications Director of the AIC, said: “Coronavirus has had a devastating impact on many people’s lives. It has also swiftly changed the way we live, work, shop and socialise. It’s brought an end to the longest bull market in history and caused sharp market falls. Amidst all this market uncertainty, it’s reassuring to know that nearly half of AIC member investment companies have had the same manager for ten years. Eighteen investment company managers have steered their companies through at least 20 years of market ups and downs, experience that will serve them well in the current volatile market conditions.”
The longest-serving investment company manager is Peter Spiller, who has run Capital Gearing for 38 years. Second is Simon Knott, the manager of Rights & Issues for 36 years. Next is James Henderson who has managed Lowland for 30 years. Completing the top five are Alistair Whyte and Job Curtis who have headed Aberforth Smaller Companies and City of London for 29 and 28 years respectively.
Some of the longest-serving managers share their bear market insights and the most important lessons they have learned below. A full table of the longest-serving managers is also included.
Peter Spiller, Manager of Capital Gearing, said: “In fifty years of investing I have experienced a number of bear markets. They do come to an end, so avoid despair and stay calm. Precise timing is more problematic, and usually impossible. Currently the battle in equity markets is between exceptional fiscal and monetary stimulus providing support against an economic slump, with luck short-term, and a credit crunch exacerbated by the spat between Saudi Arabia and Russia over oil. Excessive corporate debt has turned a drama into a crisis.”
Katie Potts, Manager of Herald, said: “I have been managing Herald Investment Trust from inception in 1994. The current headache always seems to be the worst. People looked over the edge fearing the collapse of the banks in 2008, but it did not happen – they were rescued, and in hindsight little damage was done to most people’s lives. The lesson is don’t panic.”
Austin Forey, Portfolio Manager of JPMorgan Emerging Markets Investment Trust, said: “Very volatile markets are always stressful, but we have some experience to draw on in terms of what not to do. In a big downturn one thing to avoid is the temptation to run for cover after the crash has happened: it’s very easy to act pro-cyclically, but you should try to avoid that.”
Hugh Young, Manager of Aberdeen Standard Asia Focus, said: “During any crisis one of the most important things to do is to keep calm. Markets sell off and share prices plummet but it’s important not to panic and above all you need to pause for thought. The breakout of COVID-19 in China, its spread across the region and now globally have already impacted economic activity and company profitability and will continue to do so.”
Austin Forey, Portfolio Manager of JPMorgan Emerging Markets Investment Trust, said: “Firstly, don’t force ideas or feel that you have to be finding something to buy and sell every day: concentrate on what makes a difference. Secondly, work out what you’re trying to do and don’t let market cycles or performance cycles drag you off course.”
Hugh Young, Manager of Aberdeen Standard Asia Focus, said: “The slide in markets has certainly meant companies are a lot cheaper than they once were. But during my over 30-year career I’ve learnt not to focus solely on price. Valuations attached to some companies may be justifiable, if possibly still too expensive, given the headwinds they face. For other companies it could be a good entry point for patient investors. For Asia Focus’ portfolio we’ve identified opportunities around the region where share prices are attractive and the management, balance sheet strength and business model are also compelling. Importantly they’re in good shape to weather the challenges ahead and capitalise on opportunities to take market share.”
Katie Potts, Manager of Herald, said: “I have been running high cash positions because I have been concerned by the high levels of debt of consumers, government and corporates alike. In the corporate sector the leverage in private equity owned companies has been eyebrow-raising. I hope that a silver lining will be the reminder that it is better to have companies funded by equity than debt. Generally, leverage in quoted companies is non-existent or modest, and shareholders are well able to invest further capital in solid businesses that have short-term requirements. The quoted market should be a relatively safe haven, albeit some sectors such as travel and leisure will be challenged.”
Peter Spiller, Manager of Capital Gearing, said: “We entered this period with a defensive position and have added to equity holdings where companies look able to endure unprecedented poor short-term conditions and are trading at large discounts to their long-term value. If the analogy to war means anything, it is that wars always produce inflation; do not be misled by the weakness in the CPI that we expect in the next few months. Inflation-protected assets still have an important role in any long-term portfolio.”
Katie Potts, Manager of Herald, said: “The technology sector is relatively well placed. The surge in home working is leaving unused processing power and storage on the desk. It is also creating a surge in demand for resources to work at home – internet shopping, laptops, internet bandwidth, video conferencing, datacentre cloud processing power and storage for example. In addition, while jobs are cut IT systems remain indispensable for most businesses, and the costs and expenditure will continue.
“The scale of money being printed necessitates low interest rates for a long time, and as the virus recedes an inflationary boom with rising asset prices seems highly probable next year.”
Hugh Young, Manager of Aberdeen Standard Asia Focus, said: “The outlook for the region over the next few months is uncertain given the numerous factors at play. Encouragingly policymakers' reaction has been swift and they continue to have policy tools – both monetary and fiscal – at their disposal. Longer term the economic balance of power will continue to shift from west to east, and Asia will remain a key driver of global growth and home to some of the fastest growing companies in the world.”
Austin Forey, Portfolio Manager of JPMorgan Emerging Markets Investment Trust, said: “As more money is allocated passively and investor time horizons get ever shorter, patient long-term investors should find more and more opportunity.”
For a full list of the longest-serving managers please click here.
Longest-serving managers over 20 years. Source: AIC/Morningstar (as at 27 March 2020)
