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Meet Vanessa van Vuuren – SIM small cap portfolio manager

| Investment Landscape

Vanessa likes to be challenged and thus finds professional fulfillment in managing and investing in small- and mid-cap stocks. She started out studying towards an industrial psychology degree but did a U-turn when she discovered a love for investing. She balances the particular stresses of her career by engaging in non-investment-related activities that give her time out from the complex investment decisions that often keep her awake at night.

How did you get into the investment world?

I started out studying for a Business Science degree with Honours in Industrial Psychology (a field quite far removed from investments!) at UCT but during the course of my degree discovered I enjoyed the finance and accounting courses. So I started taking extra courses on these subjects and after completing the psychology stream, returned to do a B.Com. Honours in Financial Analysis and Portfolio Management (FAPM).

At that time, I was searching for a job in investments but most traditional investment firms wouldn’t employ me with a Business Science Psychology degree. I then landed a role as the ‘investment writer’ at Oasis Asset Management and a few months after I arrived some analysts left the equity team and I was invited to apply for a  role as an analyst. That was my ‘lucky break’ into the investment world.

Why small and not large caps?

I find small caps to be the most stimulating, challenging and exciting area of investing. There’s generally a lot less information available (both from the companies themselves as well as sell-side stockbroker research) and so you are required to dig around before formulating an investment opinion. There is also a high degree of variety. For instance, I analyse more than 35 companies, which allows me to hone my ability to understand stocks across various industries, sectors of the market (industrials, resources and financials) and business models.

Risks are generally higher, as are potential returns, so it is extremely challenging to avoid making costly mistakes but it does mean you learn how to navigate illiquid markets and build up strong negotiation skills when you need to strike the best deal for your clients when buying or selling large blocks of shares.

What is most different about analysing and investing in small- and mid-caps versus the rest of the equity universe?

I’ve learnt that in small caps you need to be cynical when it comes to management guidance and you need to piece together a holistic multi-dimensional perspective of a small-cap investment by checking with competitors, suppliers, customers, unlisted players, etc.

What have been the highlights of your investment career?

The highlights of my career have been my ‘lucky break’, which got me in to investing in the first place, and then being given the opportunity to manage portfolios and being held accountable for managing other people’s money.

What have been your lowlights/most difficult investment decisions?

The most difficult times in my career have been when I have put in a high conviction, buy recommendation on a stock and something has unexpectedly gone wrong, for instance, a recapitalisation has been required or there has been a major write-down in assets. In these instances, there is often a massive price correction that is compounded by illiquidity, as is often the case with small caps. The learnings from these experiences are significant and serve to make you that much more aware and knowledgeable of potential pitfalls next time around.

Which investor do you look up to most?

I subscribe to the detailed analytical principals laid down by Benjamin Graham in his famous work, The Intelligent Investor, but I refuse to put any Warren Buffet quotes in my marketing material (not because I don’t respect him as a great investor, but because I think his lines are glibly over-used by aspiring investors who merely pay lip service to what he says without dedicating thought to their own personal investment philosophy and process, which is often very different!).

I really enjoy reading Jason Zweig, who can sometimes be a rather contro-versial commentator, but always has an interesting view and take on investing.

How do you deal with the unique stresses of being a professional investor?

Some of the ways I try to destress are by doing pilates, going for long walks, reading non-investment related, fiction books and spending time with family and friends.

Given the challenges and accountability that goes with being the fiduciary of others’ assets, I try to keep a log book and written account of my investment decisions, including my actions; what I was thinking at that point in time and what informed my decision-making. It has been fascinating to reflect on these and to process the implications of being a professional investor.

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