Fidelity has today announced that Sanjeev Shah will succeed Anthony Bolton as manager of the £3.2 billion Special Situations fund.
Established in 1979 as Fidelity’s first UK based unit trust, Special Situations has been by far the most successful fund during its existence and unusually has been run by the same person, Anthony Bolton, continuously. Had you invested £1,000 at launch, it would have been worth over £168,000 on 11 May 2007, equivalent to an annualised return of 20.6%. However, all good things come to an end. Following the fund being split in two last September, prompting the launch of the Fidelity Global Special Situations fund managed by Jorma Korhonen, Bolton will hand over his remaining half to Shah at the beginning of next year.
Shah is due to cease running his £2 billion offshore Fidelity Funds European Aggressive fund at the end of this month. He will then take a sabbatical over the summer before returning to work alongside Anthony Bolton in the run up to taking full responsibility for the Special Situations fund from 1 January 2008.
Business as usual?
Yes, for the time being, as Bolton will remain in charge until the end of the year. Shah also adopts a similar investment style to Bolton, namely getting into sectors and stocks before analysts upgrade them, so it’s unlikely there will be radical change when he does take charge. In fact there are currently some large common holdings across Shah’s European Aggressive and Bolton’s Special Situations funds.
Is Shah the new Bolton?
This is a much harder question to answer, in fact only time will tell. Shah has 11 years of experience at Fidelity, six as an analyst and five as a manager, so is no novice. We’ve also interviewed him several times over the years and he appears to be a capable manager. However, he still lacks Bolton’s extensive experience and there’s a question mark over whether he has the necessary talent to be a true great. As the figures below highlight, Shah delivered very promising returns when manager of the UK Aggressive fund, but he has struggled over the last year on his current European Aggressive fund. The latter is largely due to sectors that he backed, including technology, media and pharmaceuticals, not yet coming back into favour, although exposure to specific stocks such as Partygaming and BP also hurt performance. It would be overly harsh to slate Shah for this short term underperformance, it can happen with this style of investing, but it does mean he’ll need to get off to a good start next year to dispel any concerns.
Sanjeev Shah’s past performance:
15/10/02 - 10/8/05 Fidelity UK Aggressive +84.1% versus FTSE All Share Index +52.3%
10/8/05 - 11/5/07 Fidelity Funds European Aggressive +34.2% versus FTSE Europe Index +40.3%
What action should you take?
There is no pressing need to make a decision regarding the Special Situations fund. As outlined above, Bolton remains in charge until the end of the year and it’s unlikely Shah will make significant changes in the short term next year. However, if you would prefer to switch to a more proven manager with similar objectives to the Fidelity Special Situations fund, we suggest considering the following funds:
Artemis UK Special Situations (£1,006m) – Derek Stuart
AXA Framlington UK Select Opportunities (£1,555m) – Nigel Thomas
Investec Special Situations (£165m) – Alistair Mundy
Merrill Lynch UK Special Situations (£729m) – Richard Plackett
Rensburg UK Select Growth (£632m) – Mark Hall
What about Fidelity Global Special Situations?
Since the split last 15 September, the newly formed Global Special Situations fund has returned 13.4% and ranks 93rd of 183 funds in the IMA Global Growth Sector (to 11 May 2007). While this is hardly a flying start, it’s too short a period over which to judge manager Jorma Korhonen. However, we have greater conviction in other global managers such as Peter Saacke (Artemis Global Growth), Aled Smith (M&G Global Leaders) and Mark Breedon (Investec Global Free Enterprise). You should also review whether last year’s split unbalanced your geographical portfolio weightings, if so some re-balancing could be prudent.
All in all, Fidelity has made a sensible choice in an impossible situation. In an ideal world Anthony Bolton would work forever but, despite his legendary status, he is a mere mortal…
All figures shown bid to bid with net income reinvested.
Please note these investments are intended for medium to long term savings. Their value may fall and you may get back less than you invested. They may not be suitable for you and this page should not be regarded as a personal recommendation. If you would like specific advice please call us on 020 7189 9999.