Small caps are well known for their strong performance in the recovery phase of a market cycle, but during the depths of the financial crisis small caps suffered as much as everything else.
For Georgina Brittain, small- and mid-cap manager and managing director at JPMorgan Asset Management (JPMAM), it was so out of favour in the depths of the downturn that she describes the period as an “absolutely horrendous time”.
“All the money I run is relative to a benchmark, so we were in the extraordinary situation where we went down, for example, 20 per cent and the benchmark fell 35 per cent. That is a good result for what we were asked to do, but the point is you are coming in every day watching your clients’ money disappearing, and watching valuations crumbling at your feet and obviously people weren’t exactly turning around giving us money to invest.
“It would have actually been a perfect time to invest, but the world doesn’t work like that,” she smiles.
However, the start of the turnaround was almost as fascinating according to Ms Brittain, as companies fell to extraordinarily low valuations, particularly in the smaller companies sector. It was not until 2009 that it became clear that equity investors were willing to recapitalise these companies and banks started lending again.
“Suddenly we weren’t sitting on the edge of the precipice [anymore]. At that point, you can re-evaluate what you’re holding, why you’re holding it and we started to change the portfolio in a really big way to take advantage of the uptick,” she says.
Understanding behavioural finance is something that underlies how Ms Brittain invests, particularly why investors do the same thing time and time again, and how to take advantage of that.
She explains: “One thing is running your winners; people are much more likely to sell a winning stock than a losing one and they sell it too early. Also one of my strengths is cutting the losers. Investors don’t like to crystallise their losses, because that is it. My view is that I want to take the money out of something losing me money and put it in something that is going to make me money. It’s still not easy and you still look like a fool – we all get things wrong – but I’d much rather just admit it and walk away as soon as possible.”
Fund management is a competitive business and for this manager, that is one of the best things about it.
Clearly enthusiastic about her work, Ms Brittain acknowledges that while she is “almost a lifer” at JPMAM, it says a lot that she and many of her colleagues still do the job and still enjoy it.
“My view is that, if you are a tired fund manager you can no longer do the job. You have to be absolutely driven; this is an utterly competitive job so you have to always want to win and beat your benchmark and beat the opposition, but you also have to be interested. If you’re not interested in the actual companies, in the detail, then it’s not a job you can do well,” she explains.