Fidelity China Special Situations PLC
Rated Fund 2015-20. Taps into rising consumer demand in China
Fidelity China Special Situations is one of two trusts that focus purely on China – a market manager Dale Nicholls believes to be too big to ignore.
He thinks that one day the sector will be Asia ex China rather than Asia ex Japan, because the long-term possibilities for China are so great. Darius McDermott, managing director at FundCalibre, the fund ratings and research provider, agrees, “as long as you are willing to go through some ups and downs along the way”.
Nicholls, who has managed the trust since 2014, has presided over a considerable improvement in its performance. This is partly due to a revival in investor sentiment towards China and partly his focus on ‘new’ China – investing in areas of the market related to China’s modernisation. He likes small and medium-sized companies where he believes a lower level of research leads to more mis-pricing opportunities.
Since 2016 Nicholls has been able to invest 10% in unlisted companies, up from 5%, amid a trend for Chinese companies to list on a public stock exchange after their development has progressed. At the end of 2019 the trust had a 6% exposure to unlisted companies.
Gearing of 23% and the manager’s ability to take short positions in single companies and indices also serve to increase its risk profile, so it is best suited to more adventurous investors willing to take a patient approach.
For long-term investors who can take some volatility, David Liddell, a director at online investment advisory service IpsoFacto Investor, believes “China, with its ever-expanding middle class, is surely a must for some portion of an investment portfolio”. This trust’s reasonably high discount (averaging 12% over three years) adds to the attraction.
Narrative and ratings content all as of January 2020.See all Money Observer rated funds
|Alibaba Group Holding Ltd ADR||10.52 %|
|Tencent Holdings Ltd||10.32 %|
|China MeiDong Auto Holdings Ltd||7.03 %|
|Fil Loan Issuer Term 02/14/2023||5.69 %|
|21Vianet Group Inc ADR||3.74 %|
|Tencent Holdings LtdCFD||3.62 %|
|China Pacific Insurance (Group) Co Ltd Class HCFD||3.25 %|
|Hang Seng China Enterprises Index Future Mar 20||2.87 %|
|Hang Seng Index Options June. 29, 2020 Put 24000||2.64 %|
|Wuxi AppTec Co LtdCFD||2.59 %|
|Asia - Emerging||89.57 %|
|Asia - Developed||9.36 %|
|Consumer Cyclical||36.40 %|
|Communication Services||13.83 %|
|Financial Services||7.11 %|
|Consumer Defensive||7.04 %|
Dale Nicholls joined Fidelity in 1996 as a Research Associate in our Tokyo office. It was during his tenure as an analyst that Dale first began to take an interest in the dynamics of the Chinese market. He regularly visited Chinese companies to get a clear view of the key supply and demand chains of the industries he covered. In 2003, he was promoted to portfolio manager of the Fidelity Pacific Fund and retains management of that portfolio today. In his current role, Dale spends much of his time travelling within China to meet with the management teams and competitors of companies in which he may, or already does, invest, visiting well over 100 companies a year.
Data provided by Morningstar.
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