Fund management legend Anthony Bolton stepped down from running the Fidelity Special Situations fund at the end of December after 28 years at the helm. Though Bolton is to remain at Fidelity, he is moving away from day-to-day fund management into a new role that will include the mentoring and developing of Fidelity’s UK and European fund management and research teams.
A Cambridge University graduate in Business and Engineering, Bolton began his career in 1971 as an investment analyst with Keyser Ullman, moving into a fund management role with Schlesinger Investment Management in 1975. He joined Fidelity in 1979 and it was there that he was to make his name. He began running their Special Situations fund when it was launched in December 1979, since when it has racked up growth of 16,047%. By way of comparison the FTSE All Share has grown by 4,225% over the same period. To put it another way, an investor lucky enough to put £1,000 into the fund at launch would now be sitting on an investment worth a remarkable £161,471. These figures gave Bolton a Bestinvest MRI of 99.9% in the UK All Companies sector with average monthly outperformance of 0.45% - he also ran up impressive numbers on the Fidelity Special Values investment trust and the Fidelity European fund.
Bolton’s career hasn’t all been plain sailing. The fund experienced periods of underperformance from 1989-1992 and also during the tech boom of 1998-1999 when Bolton’s value based, contrarian style was out of tune with the market. Whilst underperformance is always a concern, this does show the benefits of sticking with proven managerial talent, even when times get tough. Investors who persevered with Bolton were rewarded handsomely.
In 2006 Fidelity made the unprecedented decision to split the fund in two. Half of investors’ money remained in the original fund but half was moved into a new fund, Fidelity Global Special Situations, run initially by Bolton but since January 2007 by Jorma Korhonen. The split was prompted by concerns over the size of assets under management, which had by then risen to in excess of £6bn, a particular problem for a relatively inexperienced successor. It was also felt that restricting the fund’s mandate to a single region made less sense following the globalisation of recent years, though the original fund retains the ability to invest up to 20% overseas.
In May 2007 Fidelity named Sanjeev Shah as Bolton’s successor following months of industry speculation, and after several months working alongside Bolton Shah has now taken the reins on Special Situations. An Economics graduate from Cambridge University with an MBA from INSEAD, Shah joined Fidelity in 1996 as an analyst and became a fund manager in 2002. In 2.8 years running Fidelity’s UK Aggressive fund he achieved average monthly outperformance of 0.43% and a Bestinvest MRI of 95.9%. However, this fund was substantially smaller than Special Situations and a subsequent spell running a European fund was less successful.
Recommendation
Special Situations was once rated 4 stars by Bestinvest but this was reduced to a 2 star rating in 2005, a decision prompted by uncertainty over Bolton’s successor rather than any reduced confidence in the man himself. In view of Shah’s promising track record we are maintaining the 2 star rating following the handover.
Is Shah the new Anthony Bolton? Probably not, but back in 1979 Anthony Bolton had yet to earn his current reputation. Shah faces a more difficult and more high profile start, with large assets under management and investors watching his every move. We will be meeting Shah again in due course to further assess his abilities. For the moment we suggest existing investors stay put, but for new money we have higher conviction alternatives elsewhere. Investors looking for a similar fund in the UK All Companies sector should consider Artemis Special Situations, Merrill Lynch UK Special Situations or M&G Recovery.