Fidelity Special Values enjoys bumper five years under Alex Wright

Five years since taking over as manager of the Fidelity Special Values investment trust, manager Alex Wright has managed to almost double the benchmark return in net asset value terms.

The trust announced in its annual results on Thursday that over five years to 31 August 2017 the NAV had returned 125.2% while the share price had risen 159.3%. Both of these returns are significantly more than the 63.7% return generated by the FTSE All-Share, the fund’s benchmark, over the same time period.

Over the financial year the trust’s NAV rose 19.1%, compared with a gain of 14.3% from the FTSE All-Share, while the share price was up 28.1%. The result has been that the trust’s discount to NAV has narrowed from 10% at the start of the reporting year, to 3.2% now.

Launched in 1994, the Fidelity Special Values was managed by Anthony Bolton until he stepped down in 2007 and handed the mandate to Sanjeev Shah. Wright took over on 1 September 2012.

Over Wright’s tenure, the NAV of the trust has increased in absolute terms at an average rate of 17.6% per year, ahead of an annualised index return of 10.4%, while the share price has returned 21% per year.

Wright attributed to the outperformance in the last 12 months to strong stock selection, with the portfolio’s overweight position in financials being a large contributor to returns. From an individual stock perspective, the largest contributor to returns came from the litigation finance company Burford Capital, while holdings in Citigroup and esure Group also boosted performance.

“Financials remain the largest absolute sector weighting in the company,” he said. “The allocation to banks has risen with the addition of two new ideas (Allied Irish Bank and the Royal Bank of Scotland), both making their debut in the portfolio under my tenure.”

Wright added that merger and acquisition activity was also a key driver of returns, with the fund’s holding in the Indonesian palm oil plantation owner MP Evans rising after Kuala Lumpur Kepong made a takeover bid for the company.

Wright said: “A strong run in the market over the last 12 months and indeed over the longer term has left valuations above historical averages in some areas, and sentiment relatively elevated.

“While this need not be a cause for immediate concern, we believe it constrains the ability of the overall market to continue making above average returns in the future, and makes it more vulnerable to a shock. However, a selective approach, focused on identifying cheap companies with improving fundamentals, should allow the company a good chance of outperforming the market over the coming years.”

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