Fidelity Special Sits
On initial view, Fidelity Special Situations seems an odd choice for 'What's the Alternative?'. One of the best-performing funds of all time, it has made its investors very wealthy. Manager Anthony Bolton could well be the best manager in the UK and while he remains at the helm, no-one would suggest that investors would be better off elsewhere. But its future is uncertain following Fidelity's decision to split the fund. The second fund will have a different mandate, possibly pan-European and Bolton will only run one of the funds until he retires from day-to-day fund management in 2008. The second manager is yet to be announced. Nobody doubts that Fidelity has a rich pool of talent but, even after the split, any new manager will be taking on a fund of at least &3bn. This is a big ask. Fidelity Special Situations has been a default choice for many years, but our group of fund pickers discuss whether there is anywhere else they can get similar expertise and consistency with a more certain future.
north investment Partners
Anthony Bolton has shown that he has the ability to outperform in rising and falling markets. While he is still managing the fund, there is no reason to sell out. If it falls, it will not fall overnight.
Bolton has been at Fidelity a long time and he has apprentices. But the main consideration for a completely new buyer is the size of the fund. If you were starting with a clean piece of paper, you would look for a smaller fund where the manager is hungrier.
My top choice would be Merrill Lynch UK Special Situations, run by Richard Plackett. Derek Stuart of the Artemis UK Special Situations fund is another possibility.
I do not believe investors necessarily need to find a fund called 'special situations' because all this means is a bottom-up stockpicking fund. In this environment, stockpicking is the key factor to success - it is all about alpha.
The other manager I might mention in the same breath as Bolton is Philip Gibbs at Jupiter. He has had a pretty stellar record.
I cannot see the point of existing investors leaving while Anthony Bolton is still running the fund. But I certainly wouldn't buy any more because Bolton is not going to be there forever.
The second Special Situations fund will have a different mandate. Bolton has always made it clear that he can run a big fund - the trouble is, can anyone else? I believe the fund has generally been bought because of Bolton rather than because of the 'special situations' mandate.
There are various fund managers I would put in the same bracket - Nigel Thomas of Framlington, Neil Woodford at Invesco Perpetual, Ashton Bradbury at Old Mutual and Richard Plackett at Merrill Lynch.
For a straight special situations fund, I would also look at Derek Stuart at Artemis. Bolton's style is as a contrarian, recovery investor and this has worked very well over the past five years.
Over the next five years, I believe growth may well do better, in which case I would also look at Ian McVeigh at Jupiter UK Growth.
Chelsea Financial Services
It surprises me that investors continue to buy Fidelity Special Situations. For existing holders it is certainly a case of wait and see.
They need to see who will run the other half and what its new mandate is going to be. They also need to see who will take over Anthony Bolton's share at the start of 2008.
I certainly wouldn't be putting new money into the fund right now. Instead I would look at the M&G Recovery fund, managed by Tom Dobell. This has been brilliantly consistent and is a good, old-fashioned special situations type fund. Alternatively, I would look at Nigel Thomas at Framlington and Derek Stuart at Artemis.
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