The manager’s steep rise to fame since 2008 led to his appointment of the flagship Fidelity Special Situations fund earlier this year, as well as the Fidelity Special Values trust in September 2012.
His added responsibility has led some holders of the fund to question Wright’s commitment to Fidelity UK Smaller Companies, which closed to new money last year following a stellar run of performance and inflows.
Performance of fund, sector and index since launch
Source: FE Analytics
Jonathan Winton was appointed co-manager of the fund in March 2013, but Wright (pictured) says he is responsible for stocks at the lower end of the portfolio.
“When it comes to allocating time I think about it more on a stock level rather than on a fund level,” said Wright.“When it comes to the mid and small cap companies that I hold across Fidelity UK Smaller Companies, Fidelity Special Values IT and Fidelity UK Special Sits, I spend the most time on these.”
“These are the higher conviction plays in the small fund, such as Brewin Dolphin, DCC and ICap. They are my biggest positions and these are the companies I spend most time looking at.”
“Winton looks after the companies that are exclusively held in the smaller companies fund, for example those that are less than £200m.”
“As a result, I am in charge of the majority of AUM as those that are held across all three funds are naturally my higher-conviction positions.”
Wealth manager Brewin Dolphin, investment group and holdings company DCC and broker ICap are all among the top-15 holdings in both Fidelity UK Smaller Companies and Special Values.
Wright confirmed he has been buying all of the companies for his £2.8bn Special Situations fund since he took it over from Sanjeev Shah in January.
Life company Resolution and UDG Healthcare are also held across the three portfolios. Wright says the former has been among his biggest buys since he took over the Special Sits fund.
The five companies have a combined weighting of 20 per cent alone.
Although Wright is responsible for the highest-conviction positions, with more than 100 holdings in Fidelity UK Smaller Companies, his co-manager is responsible for the vast majority of smaller and micro-cap names.
Winton has been at Fidelity for eight years, but has no experience of running retail money in the IMA universe over this period.
Some FE Trustnet readers have expressed concern over the performance of Fidelity UK Smaller Companies in recent months – surprising given that the fund is ahead of its Numis Smaller Companies (ex IT) benchmark over one, six and 12 months, and level over three.
Performance of fund, sector and index over 1yr
Source: FE Analytics
Wright is marginally behind his sector average over the past six months, but given that small cap investing is a long-term exercise – as well as the fact his fund has managed double-digit returns over the period – any criticism is harsh to say the least.
For anyone worried about Wright’s new responsibilities, and the possibility of him passing on full ownership of the fund to Winton in the near future, there are a number of top-rated alternatives in the IMA UK Smaller Companies sector.
Paul Marriage’s Cazenove UK Smaller Companies fund is now closed to new money, though Giles Hargreave’s Marlborough UK Micro Cap Growth fund, Philip Rodrigs’ R&M UK Equity Smaller Companies fund and Daniel Nickols’ Old Mutual UK Smaller Companies fund are all possible options.
Like Wright, all of the managers mentioned above are FE Alpha Manager-rated. FE Trustnet looked at possible alternatives to his fund in an article last year.
On a separate note, Wright says his investment trust has a big advantage over his other two vehicles.
“If I could back one of the funds, it would have to be Special Values IT, as this is the least constrained,” he explained.
“The small cap fund can’t invest in companies that are more than £2bn, and the Special Sits fund is larger and therefore naturally has to invest further up the market cap spectrum.”
The manager adds that the closed-ended structure of Fidelity Special Values IT means he doesn’t have to contend with inflows, giving him even greater flexibility.
He says he is relatively relaxed about the trust’s discount at the moment, which has come in from 14 per cent to 2 per cent since he took over 18 months ago.
FE data shows the trust has been a revelation under Wright, more than trebling the returns of its benchmark since he took it over.
Performance of trust and benchmark since Sep 2012
Source: FE Analytics
Wright has used his expertise to increase his exposure to small and mid caps in Fidelity’s flagship Special Situations fund in recent months.
He says assets of almost £3bn are manageable at present, but confirmed that growth to between £5bn and £6bn – which occurred under previous manager Anthony Bolton – would jeopardise his high-turnover process.
The manager is generally quite cautious at the moment, believing that markets could be due a breather.
However, he is confident that his contrarian, deep-value style will identify companies that can perform well regardless of the market outlook.
“The beta of the Special Situations fund is 0.9, which is low compared with where it’s been over the past five years,” he said.
“This is a natural result of where markets are, as they’ve been very strong in recent years.”
“Compared to what we’ve seen in the last five years, we won’t see the same kind of performance. I think markets will be a lot flatter this year.”
