For instance his firm, SW Mitchell Capital, offers corporate sponsorship for aspiring classical talent. And there is the immaculate Grotrian-Steinweg piano in the corner of his office.
Investment Adviser met with him in a boardroom whose walls showcase the art-meets-nature black and white photographic talents of “a good mate”, while the firm’s hallways boast the contemporary artwork of his wife, Geraldine.
The firm’s founder and investment manager is clearly a man who enjoys a well-rounded lifestyle.
This need for balance is reflected in the boutique’s product offering: three Ucits European equity funds, the flagship of which is run by Mr Mitchell himself; three segregated institutional mandates; and three hedge funds, including the Charlemagne fund.
Via the traditional university ‘milk round’ that recruited minds fresh from St Andrews, Mr Mitchell entered the industry, landing a coveted graduate role at Morgan Grenfell Asset Management in 1987. “At the time, everyone either wanted to work for Morgan Grenfell or Warburg’s [the latter becoming Mercury Asset Management, now part of BlackRock], although it’s all changed now, hasn’t it? I don’t suppose anyone’s even heard of Warburg now, or Morgan Grenfell, for that matter...” he says.
Mr Mitchell likens his first mentor John Armitage, now of Egerton, to “a master. It was like working with someone like Michelangelo, the greatest at what he did at the time”. But he also thanks his early environment at Morgan Grenfell, which believed in “giving young people lots of responsibility, very early on”.
“It was a real old-fashioned, buccaneering investment bank so I was given, I think, £500m two years after starting, which was basically the European portion of its UK pension funds.”
His youth stood in the way of being particularly client-facing, which meant he was able to just “get on with managing the money” and so he and his team spent the next eight years accruing $25bn (£15.3bn) under management, becoming what was then the largest London-based manager of European equity assets, he claims.
In fact, that single-mindedness comes through at several points with Mr Mitchell stressing the importance of “getting on with it” and removing the “distractions” of office politics and administration. One senses anything other than stock selection is deemed a ‘distraction’ – a term he uses on multiple occasions.
Outsourcing the entirety of his operational, trading and accounting functions to J O Hambro for exactly this reason, while also forming part of his exit negotiations, he half jokes about traders being the “worst people to have around in the office” due to their excitable natures.
Far beyond a simple distraction, Mr Mitchell’s early career saw him face a crisis management situation almost unparalleled within the fund management sector. The protégée of Mr Armitage, as head of the European team he was responsible for dealing with the Peter Young scandal – the former fund manager whose alleged rogue trading and gender crisis plagued Morgan Grenfell, losing the business a reported £400m and precipitating its demise.
“The sad thing about Morgan Grenfell was it grew too big, then the Peter Young thing happened and of course, after something like that, management had to tighten up procedures and introduce more discipline into the company to ensure it didn’t happen again,” he says.
Claiming the star fund manager system holds greater merit than that of the ‘megateam’ or ‘consensus portfolio building’, parent company Deutsche Bank obviously felt differently and attempted to future-proof against repeated key-man risk.
“When I left, it was starting to extinguish the magic and I could see where things were headed. The final chapter of the Morgan Grenfell story is appallingly tragic. From running $100bn to basically running nothing was a really tough time for me, having been there for so long and seeing the writing on the wall, that the way we’d done things in the past was going to have to change. You’re always immensely loyal to your first job – you have that really strong bond like a first love, which you never lose.”
Mr Mitchell looked to follow in the footsteps of some of his friends who were doing rather well in the rising world of hedge funds, such as Crispin Odey, and exited the business, joining J O Hambro Investment Management in 1998 as a director and head of specialist equities, which he describes as a “wonderful, wonderful place”.
He established and ran the Charlemagne fund, the long/short European equity vehicle he still manages today. Alongside this, he also managed the JOHIM European fund from inception in 1998 to 2005, delivering a 133 per cent return over that period. In 2005, he founded SW Mitchell Capital, bringing across several former JOHIM colleagues and today remains driven by two criteria: focus on European equities; and fund manager rigour around stockpicking.
Notwithstanding his respect for the star manager and individual talent, Mr Mitchell is not oblivious to the advantages of external influences – basically, being in the right space at the right time. “[My time at JOHIM] was another extraordinary period because we went from nothing when I started to having almost £1bn when I left in 2005. We were very lucky. The dollar was strong, we just captured the tail-end of the bull market, Europe was the hottest place to be, and we were in one of the earliest hedge funds, so the fund grew extraordinarily rapidly.”
Starting a career amid such golden years begs the question of whether the troubles Europe (and the financial world at large) has faced are hard for him to tackle, especially now responsible for his own outfit. “Our view is that the eurozone would kind of ‘muddle through’ somehow, and so we haven’t let ourselves get deflected from purely looking at stocks. The reason we’re so confident is that the eurozone has a hell of a lot of less debt to GDP than Britain or America. The eurozone is not in a debt crisis – it’s a problem of the periphery and competitiveness, largely.”
He points to the continent’s huge trade surplus versus the trade deficits in the UK and US. “If you were a Martian looking at the numbers from space, you’d say ‘Wow, Europe is the most competitive, fiscally prudent region of the developed world’. Germany’s trade surplus is larger than China’s and Germany is half the eurozone. We all get fixated about the periphery and yet Greece, Ireland and Portugal all surprised us. Austerity has worked, however impractical that is to the British press.”
Fears over country exits and euro breakups are hugely overplayed, he says, believing the focus on European profits through emerging market growth is “last year’s story”.
Criticising many European managers’ recent “drift” towards global mandates, Mr Mitchell hopes his determination to keep his team tight, focused and committed to stock selection ought to come through in performance.
Currency movement is a core theme he is mindful of, believing those managers still seeking out the big international growth stocks will overpay. “Take Unilever, which has got roughly 5 per cent of its sales in India, when the rupee has fallen by 40-50 per cent. Of course you can hedge it for a while but it effectively takes 3 per cent off your profit-generating capacity. So we think all those stocks are way too expensive.
“For me, the opportunity of a lifetime has to be domestic Europe. I’ve never seen the gap between the performance of best quality international and domestic companies quite as wide as today, in my 25 years doing this job.”
CV
2005 - present - Founder and fund manager at SW Mitchell Capital
1998 - 2005 - Principal director and head of specialist equities, J O Hambro Investment Management
1996-1998 - Director and head of European equities, Morgan Grenfell Asset Management
1990-1996 - Manager of Morgan Grenfell European fund, Morgan Grenfell Asset Management
1987 - 1996 - Manager of continental European equities for British pension fund clients, Morgan Grenfell Asset Management
