Wright’s appointment was announced this morning following the news that Sanjeev Shah, who has managed the fund since January 2008, will step down from fund management after 17 years in the business.
Wright, who currently runs the top-performing Fidelity UK Smaller Companies fund and the Fidelity Special Values trust, will work closely with Shah until he assumes full control in January 2014.
Wright has managed funds in the IMA universe since February 2008. Over that time he has returned 223.03 per cent beating his peer group composite by a massive 155.55 percentage points.
Performance of manager vs peers since February 2008
Source: FE Analytics
His five crown-rated Fidelity UK Smaller Companies fund is the best performer in the IMA UK Smaller Companies sector over one, three and five years and has comfortably beaten its benchmark – the Numis Smaller Companies ex IT index – over each of those time frames.
In order to protect existing investors the fund was closed to new money earlier this year.
Shah on the other hand has had more of a bumpy ride managing the Fidelity Special Situations fund.
He took over the portfolio from industry legend Anthony Bolton and maintained the same contrarian approach to his predecessor. However, as many readers may remember, his high exposure to UK banks contributed to the fund’s underperformance in 2010 and 2011.
Nevertheless, the manager stuck with his instincts and Fidelity Special Situations has been a top-quartile performer in the highly competitive IMA UK All Companies sector since Shah has been at the helm. The fund has returned 50.84 per cent to the FTSE All Share’s 31.11 per cent in this time.
Performance of fund vs sector and index since Jan 2008
Source: FE Analytics
Wright is known for following the same "contrarian/value" approach for which the Fidelity Special Situations fund has been renowned for. The manager invests in unloved stocks which have limited downside risk, and potential for positive change.
Following the news, Fidelity’s global chief investment officer of equities, Dominic Rossi, said: "We would like to take this opportunity to thank Sanjeev for the tremendous contribution he has made to the firm and our clients’ portfolios over the last 17 years."
"He has delivered strong performance to investors in what has been an extremely challenging period for markets."
"Alex’s appointment shows the depth of talent within Fidelity’s investment team. His excellent track record with UK Smaller Companies and Fidelity Special Values confirms that Fidelity continues to nurture portfolio managers of the highest quality."
"He has a strong track record in both small cap and all cap disciplines and we are confident that he will deliver strong performance for investors in the Fidelity Special Situations fund," he added.
Charles Stanley’s Stephen Peters says this is a well thought-out appointment and backs Wright to succeed.
"He has done a great job as manager of the open-ended fund and the investment trust. This is a good example of Fidelity doing what they do best and recruiting from within," he said.
"This is a great platform for him to make a name for himself to a wider audience and I am very pleased for him. Investors in his trust have seen a marked improvement in performance since he took over from Shah last year, with the discount previously somewhere near 16 per cent and now at something like 3 per cent," he added.
Wright took over the Fidelity Special Values trust from Shah exactly a year ago to the day. Over that time it has returned 65.66 per cent, more than three times the amount made by the FTSE All Share.
Performance of trust vs sector over 1yr
Source: FE Analytics
Peters says these returns show that investors should not be concerned about Wright’s ability to manage a non-smaller companies’ fund, as the Fidelity Special Values trust is an all cap portfolio.
"He has demonstrated his ability to manage across the market cap range, as you can see just from his top-10 holdings that he has the likes of Royal Dutch Shell, Glaxo, Lloyds and Barclays," he said.
"His opportunity set, if you like, is understandably wider in the mid and small caps but he is certainly prepared to buy the larger names, so I have no issue with that," he added.
However, Peters says that one possible issue may arise from the fact that Fidelity Special Situations is much larger than Fidelity Smaller Companies fund.
Fund analyst at Hargreaves Lansdown Richard Troue agrees that the issue of fund size is a big challenge for Wright, especially given that he has operated his small cap portfolio with such a high turnover in recent years.
However, he is confident that Fidelity has chosen the right man to fill Shah’s boots.
"I don’t think the issue of fund size will be too much of a concern," he continued. "We still need to meet with the manager and it will be interesting to see what he says when this question is posed to him, but he already has experience running a larger cap portfolio in Fidelity Special Values IT."
"Like the trust, I’d expect to put more of a small and mid cap focus on the fund. Given its size, I don’t think it will be too difficult for him to change things around – some of the smaller companies he likes in the small cap fund might be a little harder to access, but I think he’s built enough experience to make it work."
"From what I’ve seen of him he’s a very level-headed guy. He’s not a particularly flamboyant presenter, but not in a bad way – he comes across as a very hard working and level headed manager, even though he’s at quite a young age."
"Running a large fund like this with so much history is a big ask, but I’ve seen nothing to suggest he’ll struggle."
Wright has worked with both Shah (pictured) and Fidelity Special Situations’ previous manager Anthony Bolton, which Troue says will hold him in good stead.
He says he is surprised by Shah’s decision to step down from fund management at this time, but points to Wright as his natural replacement.
"From what we understand, his plan is to take some time out and then return to Fidelity in a consultancy role in the future, to help monitor and develop new talent," Troue added.
While Fidelity made no mention of Wright’s running of Fidelity UK Smaller Companies, Troue believes the manager could step down from his lead role in the foreseeable future.
"It might make sense for him to concentrate on the Fidelity Special Sits fund and Special Values trust eventually, and pass on the small cap trust to an up and coming manager," he said.
Mark Dampier, head of research at Hargreaves Lansdown, advises existing investors not to change their exposure to the Fidelity Special Situations fund on the back of the news.
"Sanjeev Shah remains at the helm of the fund for the time being, and the transition to Alex Wright looks to be well organised," Dampier said.
"Alex follows the same contrarian/value approach the fund is known for, which ensures a good degree of consistency. We will meet with Alex Wright again to discuss and evaluate his ability to perform in the new role."
"In the meantime, we believe investors willing to take a long-term view and ride out periods of stock market volatility should stick with the Fidelity Special Situations fund, and it remains on the Wealth 150 list," he added.
