Investment lessons from veteran fund managers

Investors with decades of experience share their top tips for investment success. 

Volatile markets call for cool heads – and nothing is more important for seeing the bigger picture than experience.

Reassuringly, nearly half of all investment trust managers excluding Venture Capital Trusts (which total over 300) have been in place for at least 10 years, while 27 managers have guided their companies over two decades, according to the Association of Investment Companies (AIC), the investment trust trade body.

The longest-serving manager is Peter Spiller, who has run Capital Gearing for nearly 40 years. The trust is a member of interactive investor’s Super 60 list.

Other veterans include James Henderson, who has been at the helm of Lowland Investment Company for 32 years, Julian Cane, in charge of BMO Capital & Income for 25 years, and Georgina Brittain, who has managed BMO Capital & Income for 24 years.

Below, the trio reveal their top investment lessons from decades of managing money.

How to manage when things aren’t going your way

Investing during periods when an approach is out of favour – and sticking with the strategy – is key to successful investing. For Henderson, the most extreme example of this was in the tech boom of the late 1990s when tech companies that he did not own went up without investors worrying about valuations.

He said the secret to investing during difficult times was to keep explaining the investment strategy, even if people are fed up with you. “Don't hide, keep talking,” he said.

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Brittain tapped into her experience through the tech boom and bust and 2008 global financial crisis to keep calm during the Covid crash two years ago.

She notes: “Most important is that by the time markets are falling, it is far too late to panic. Such market declines offer an opportunity to buy more of the long-held, long-term winners and this is what I did. Difficult to do at the time, but definitely beneficial to performance over the longer term.”

Advice for investors starting their journey

Not being afraid to ask dumb questions is Crane’s top tip for young investors. He said: “Be worried if you get a dumb answer. There are plenty of storytellers among company managements and stockbrokers, telling you what they think you want to hear. Trust, but verify. Once you’ve done the necessary research, back your judgement. Your successes will outweigh the mistakes.”

For Brittain, making successes visible was the thing she wished she had known when was starting out in the industry.

“If you really have conviction in your ideas because you have done your work and have the evidence you need, you should feel confident to stick your neck out – that’s what we, as fund managers, do all day every day,” she said.

Having fun is the key for young investors, according to Henderson. “Keep enjoying it. Observing good managements and seeing how it all plays out is fascinating and fun,” he said.

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The one thing everyone should know

Henderson’s top lesson is that “it is never as good as it looks and it is never as bad as it looks”, therefore investors should not get depressed when things are going badly nor get excited when it looks like things are going well.

For Brittain, the most important thing she has learnt is to not sell stock market winners at they grow.

She said: “I have bought a number of small-cap companies and benefited from their rise all the way into the FTSE 100. Successes like that do not come along often but have made a crucial difference to the long-term outperformance of the trust.”

For Crane, the biggest mistakes have been when he has strayed outside his areas of competence. Instead, focusing on company fundamentals has been the recipe for success.

He said: “Investing in strongly profitable businesses with robust balance sheets is unlikely to be a big mistake, although price is important. Investing in poorly capitalised businesses with low profits can give spectacular returns if the businesses turn around, but that’s a tougher call and may well end in capital destruction.”

Source: Association of Investment Companies.