We ask four leading fund selectors for their views on the much-anticipated appointment of Anthony Bolton's successor on one half of Fidelity's Special Situations fund
One of the biggest mysteries in financial services was answered this week as Fidelity announced Anthony Bolton's successor on one half of the Special Situations fund. A relative unknown, Jorma Korhonen, will manage the new Global Special Situations fund from January 2007. Korhonen was Bolton's first choice, but his name had never been mooted in any of the fevered speculation about a replacement. So what did fund selectors make of the news?
john husselbeenorth investment partners
I've never met the new manager, but Anthony Bolton has gone on record to say that he thinks Korhonen is the right calibre. They also have 12 months in which to work together. Therefore, investors have an opportunity, under the eyes of Bolton as well, to see if this man is up to the job.
Half of the portfolio will be in this new Global Special Situations fund. The first question investors need to ask is whether that suits their risk appetite. Do they want a global special situations fund? Is this the right person to run it? Fidelity has given investors plenty of time work out whether they want to stay. If investors move, they need to take account of their tax situation and potential capital gains tax liabilities.
Jason BrittonT Bailey
Fidelity Special Situations has been a victim of its own success. Vast inflows, attracted by the heady mix of strong performance and relentless marketing, saw its size surge. Strikingly it took approximately two decades to reach £2bn in size but fewer than a further four years to reach £6bn.
When investing for the long term it is not just the size of the fund today that investors need to consider but its size - and ability to invest effectively in light of its size - for the proposed duration of their investment.Such was the increasing pace of asset growth of Fidelity Special Situations that something had to be done and Fidelity did the brave and correct thing by splitting this fund, putting investors first.
We always felt that Anthony Bolton would be advocating a Global mandate despite many speculators predicting a pan-European option. Pan-European investing has never been popular with UK investors. A global mandate will allow Jorma Korhonen to harness the skills of Fidelity's researchers and analysts from around the globe and blend the best ideas into one fund. Korhonen is very much in the Bolton mould - strong stockpicking skills, a healthy disdain for the benchmark and a reputation as an active investor to get change at investee companies.
Considering the num-ber of high profile managers at Fidelity's disposal, Korhonen's appointment has surprised most observers, not least ourselves. Apparently, the Finnish-born manager, who has been at Fidelity for 10 years, was Bolton's first choice, having previously worked closely together.
During his tenure managing Fidelity Global Focus, a small fund run on behalf Australian investors, Korhonen has beaten the index by 4%. While this is by no means a record to be ashamed of, investors in other global focus funds have seen far more impressive returns.
Although it would be easy to dismiss the appointment of Korhonen to one of the UK's highest profile fund management jobs as a marketing blunder, it should be remembered that Fidelity has been successfully appointing relatively unknown, home-grown managers to high profile positions. The obvious example being Tim McCarron, Bolton's successor at the helm of the Fidelity European fund. Given this track record, it would be foolish to write off this appointment before the fund has even been launched.
It is also worth remembering that unlike many of the newer 'boutique' fund management groups, Fidelity has a veritable army of analysts working behind the scenes to generate ideas, ensuring that most Fidelity funds are products of a well-marshalled team rather than a single fêted star manager.
The product itself is an obvious (and welcome) extension of the 'special situations' franchise to cater for a retail investment community with an increasingly voracious appetite for overseas stocks.
Interestingly, the funds will be UCITs III-registered, allowing a number of new investment powers. While they may go short of certain stocks, Fidelity was quick to quash any investor concern that it may get involved with non-equity related assets or currency bets. We view the extra powers as beneficial.
My biggest objection to the proposal is that investors who want to restore the status quo and maintain all of their exposure to the current Special Situations fund, will face an initial charge of 3.5% on any amount transferred back from the Global Special Situations fund to the Special Situations fund. Surely that can't be right?
On the plus side, Jorma Korhonen has been specially chosen for the Global Special Situations fund by Anthony Bolton, and we must respect this decision - Anthony Bolton will know better than anyone else what it's like to manage such a large fund; the responsibilities this entails and the qualities needed by someone to run a fund that invests counter to the general consensus.
Korhonen's performance on his existing funds appears to be good and he is used to running funds in which he has the freedom to select what he believes to be the best stock ideas from those identified by Fidelity's respected team of analysts, rather than having to invest with one eye on a stock market index. He does appear to share some of the same investment attitudes and principles of Anthony Bolton, but investors will want to see this translated into performance from the new fund.
If investors are looking for a direct replacement for Fidelity Special Situations they will be disappointed. Anthony Bolton has a unique investment style and few other managers have the proven ability to run such a gargantuan fund - even allowing for it being halved assuming shareholders accept Fidelity's proposals.
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