2015 Investment Trust Awards: Premier Investment Trust Group


Fidelity wins our premier group award, thanks largely to a storming performance by the newest and largest of its five regionally diversified trusts, Fidelity China Special Situations (FCSS).

Fidelity-managed trusts usually have substantial gearing and a bias towards smaller companies. These factors helped propel three-year net asset value (NAV) total returns from FCSS to 97 per cent - roughly double those of its benchmark, the MSCI China index - and ranked it highly among contenders for our best large trust award.

Three-year returns from the group's UK equities trust, Fidelity Special Values, were also very creditable, although its 2014 returns were badly dented by its 60 per cent-plus weighting in medium to smaller companies, which had a poor year.

Its smaller company weighting is much higher than that of its open-ended investment company counterpart, Fidelity Special Situations, but Alex Wright, manager of both vehicles, believes the trust's smaller company bias and gearing will deliver longer-term outperformance.

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In contrast, the much larger Fidelity European Values has relatively little in smaller companies and is cautious about gearing. It picked up well last year as manager Sam Morse's preference for large quality companies paid off after a year or so in the doldrums.

The relatively small Fidelity Asian Values and Fidelity Japanese Values (FJV) trusts both detracted from the group's average returns. The former's three-year NAV gains were the weakest of the five, although it performed reasonably well within its sector.

Nitin Bajaj, the new Singapore-based manager of Asian Values, is expected to raise exposure to smaller companies and deploy gearing of up to 15 per cent in a bid to make its performance more competitive.

Fidelity Japanese Values had the second worst three-year returns among Japan-focused trusts. Nicky McCabe, Fidelity's head of investment trusts, defends its record by pointing out that FJV's five-year returns are ahead of its benchmark. However, it was the weakest performer in its sector over that period.

FCSS is the only investment trust focusing exclusively on China, and has finally fulfilled the hopes of its founder manager, Anthony Bolton. It pulled well ahead of its benchmark in its final two years under Bolton's management, and has more than matched it since Dale Nicholls succeeded Bolton in April 2014.

Nicholls believes sentiment towards China is too negative. He says economic and social reforms are gradually improving the investment landscape 'to one where private entrepreneurs and companies can thrive', and he is finding opportunities in areas such as e-commerce, mass market consumption, healthcare and railways. As proof of his confidence, FCSS is 25 per cent geared.

Like all Fidelity's investment managers, Nicholls is supported by a strong locally based team of analysts. Nicholls says they provide invaluable assistance in spotting investment opportunities before these are widely recognised.

Endorsing the importance of Fidelity's large in-house research team, McCabe says: 'We have an unshakeable preference for proprietary research over external.' She adds that analysts are co-located with portfolio managers wherever possible.

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