Fidelity UK Smaller Companies
This is a contrarian value fund looking for positive change in unloved areas of the UK small-cap market. The fund is well diversified with 80 to 100 holdings. It will also hold up to 20% in non-UK and non-small cap ideas.
Our Opinion
Fund Manager
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Fund Manager
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Jonathan Winton has worked at Fidelity for his whole career. Between 2005 and 2013 he worked as a Pan-European analyst covering a number of sectors including beverages and tobacco, small-cap technology and support services. In March 2013 he became manager of the Fidelity UK Smaller Companies fund. He has subsequently become co-manager on the Fidelity Special Situations fund and the Fidelity Special Values investment trust.
Risk
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Company Description
Fidelity International is a financial services corporation established in 1969. With offices in more than 20 countries, its product range spans mutual funds, defined contribution pensions, segregated portfolios and multi-manager offerings. Awarded the Elite Equities Provider rating in 2017, 2019 and 2020, Fidelity compensates managers on long-term performance, illustrating its intention to align interests with clients.
Fund Performance
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Investment process
The fund follows a contrarian value strategy, focusing on stocks that are out of favor but show signs of potential recovery. Ideas are sourced from a wide universe of about 1,000 stocks, using quantitative screens, internal research, and external insights. Jonathan relies heavily on Fidelity’s well-regarded research team, who provide in-depth analysis and ratings for each stock.
The investment process involves assessing both the potential upside and downside risks. Positive changes, such as new management or improved industry conditions, are key drivers for investment decisions. The fund's holdings usually have strong downside protection, having already underperformed in the market, but with unrecognised growth potential.
Stocks are typically bought in small initial positions, which are increased as confidence in the investment thesis grows. The fund’s turnover is moderately high (30-50% per annum), with stocks sold once the recovery is either reflected in the share price or if the original investment thesis doesn’t come to fruition.
Risk
This fund tends to perform best when value stocks are in favour, particularly in environments with higher inflation and interest rates. While it may not outperform every year, it has shown strong results when its investment style aligns with market conditions. Despite its value focus and higher returns, the fund’s volatility has generally been in line with its peers.
ESG
ESG - Integrated
Fidelity integrates ESG factors into its investment process. Analysts use both internal and external resources to assess these aspects, supported by a proprietary sustainability rating system introduced in 2019. This was supplemented in 2021 with the launch of a secondary ratings framework. Fidelity’s team of sustainable investing specialists engages with companies on various ESG issues to promote responsible practices.
Related Insights
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