Evelyn Partners has added Fidelity Special Situations to its Core Managed Portfolio Service (MPS) as the investment case for UK small and mid caps becomes more attractive.
Cheap valuations in the UK equity market have made it an appealing hunting ground for foreign buyers, with 537 British companies having been bought by overseas companies in the first three quarters of this year for £20.2bn, according to the Office for National Statistics.
They have recognised the cheapness of UK companies compared to the rest of the world, as the UK’s forward price-to-earnings ratio of 11.7 is dwarfed by the likes of the US (at 23) and MSCI ACWI (at 18.7).
Evelyn Partners’ lead portfolio manager James Burns said they too are looking to increase their exposure to the UK at this opportune entry point.
“We are seeing increased M&A activity as both corporate acquirers and private equity seek to take advantage of the historic cheapness of the UK market,” he said.
“With its greater allocation to companies outside of the FTSE 100, we believe the Fidelity Special Situations fund is well positioned to benefit from this trend.”
The £3.1bn fund has just over a third (34.7%) of its holdings in the FTSE 100, with the bulk of its assets (61.6%) allocated to small and mid-cap companies.
In doing so, lead manager Alex Wright generated a total return of 111.4% since taking charge in early 2014, beating his peers in the IA UK All Companies sector by 37.2 percentage points.
Burns said it is Wright’s “outstanding long-term track record” and “contrarian stance to investing where he sees value in the UK market” that led the Evelyn team to choose Fidelity Special Situations to gain exposure to UK small and mid caps.