Fidelity China Special Situations PLC
Rated Fund 2015-19. Taps into rising consumer demand
Fidelity China Special Situations suffered double-digit falls in its share price and net asset value during 2018 but has outperformed over three and five years and since launch in 2010, significantly so over the longer timeframes.
It is one of only a couple of investment trusts that focus purely on China, a market some people argue is too big to ignore. David Liddell, a director of IpsoFacto Investor, an online investment advisory service, says: “For long-term investors who can take some volatility, China – with its ever-expanding middle class –is surely a must for some proportion of an investment portfolio.”
Dale Nicholls has managed the trust since 2014 and presided over a considerable improvement in its performance. This is partly due to an improvement in investor sentiment towards China and partly Nicholls’ 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 lower levels 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 sufficiently. This exposure, combined with gearing of up to 25%, increases the trust’s risk profile. However, at the end of 2018, it had less than 6% exposure to unlisted companies.
For all these reasons, Morningstar regards the strategy as a “unique way of investing in Chinese stocks” for investors who can tolerate some bumps along the way.
Shares in the trust can typically be bought at a discount to net assets of more than 10%.
Narrative and ratings content all as of January 2019.See all Money Observer rated funds
|Tencent Holdings Ltd||11.22 %|
|Alibaba Group Holding Ltd ADR||9.40 %|
|Fil Usd Loan 3.01% 02/14/2020||9.05 %|
|China Pacific Insurance (Group) Co Ltd Class HCFD||4.49 %|
|China MeiDong Auto Holdings Ltd||4.31 %|
|Tencent Holdings LtdCFD||3.61 %|
|Hang Seng China Enterpise Indx_fut||3.13 %|
|China Life Insurance Co Ltd Class HCFD||2.85 %|
|Hutchison China Meditech Ltd||2.17 %|
|iShares FTSE A50 China ETF||2.15 %|
|Asia - Emerging||88.71 %|
|Asia - Developed||8.98 %|
|Consumer Cyclical||31.46 %|
|Financial Services||8.56 %|
|Consumer Defensive||7.70 %|
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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