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Fidelity Special Values
Investment trust
Launched in 1994, Fidelity Special Values aims to achieve capital growth by investing primarily in unloved UK companies and waiting for them to come back into favour. The trust can hold some overseas stocks too, although this is limited to no more than 20% of the value of the portfolio.
Our opinion
Alex is an experienced manager and has a good track record. We see no reason why he will not continue to achieve these results. While Alex is not an income investor, he has managed to increase the Fidelity Special Values’ dividend every year since taking charge in 2012. This trust should appeal to investors looking for a value play in the UK market, with a medium- to long-term time horizon.
Trust manager
Fidelity International is the investment firm that is employed to manage the Fidelity Special Values trust. Established in 1969, this financial services company has offices in more than 20 countries. Its product range spans mutual funds, defined contribution pensions, segregated portfolios and multi-manager funds. Fidelity compensates its managers based on their long-term performance, which illustrates the company’s intention to align interests with clients.
The trust is run by Alex Wright, who was appointed manager in September 2012 and has more than 17 years’ investment experience across UK and European equity markets. He joined Fidelity in 2001 as a research analyst. Alex graduated from the University of Warwick with a first class economics degree.
I’m drawn to unfashionable stocks that are out-of-favour and trade on cheap valuations. I’m looking for potential positive change that others haven’t seen yet.
Alex WrightTrust manager
Investment board
The board of directors comprises of five members, four of whom are independent. The chairman is Andy Irvine, who has more than 30 years’ experience in commercial property. He is non-executive chairman of the Jones Lang La Salle Scotland and holds other non-executive positions in the investment trust industry. The other independent board members are Nigel Foster, who has spent 30 years in financial services, and Sharon Brown and Dean Buckley, both of whom are non-executives with extensive investment trust board membership experience. Meanwhile, Fidelity’s previous head of investment trusts Nicky McCabe is the final board director. The trust’s year-end is 31 August.
Investment process
Alex’s investment style is best described as contrarian. This means he looks for stocks that are out-of-favour, but that must meet two strict criteria. The first is the preservation of investors’ capital: the manager aims to do this by choosing companies with exceptionally cheap valuations or an asset, such as intellectual property or inventory, which has the potential to limit share price falls. Secondly, he looks for companies where there is a catalyst for significant earnings growth. Although his approach often puts him on the opposite side of consensus, he is a patient investor and is prepared to wait for his stocks to deliver.
Risk
Contrarian investing has traditionally paid handsome returns, but investors must be patient. Returns can be exceptional one year and average the next. The manager tends to have a bias towards medium-sized companies, which can be higher risk than large blue chip stocks. However, this risk is mitigated by the extensive in-house research team which supports Alex, as well as the diversified portfolio of around 100 stocks.
Gearing
The manager is able to use gearing as and when he finds attractive opportunities. He has employed gearing since 2013, with a range between 6% and 14%. It is worth noting that unlike conventional methods of gearing, the manager uses contracts for difference as a means of borrowing, which is more cost-effective for the trust.
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