Fidelity announced that FE Alpha Manager Wright (pictured) will take charge of the group's £2.3bn flagship fund from Sanjeev Shah at the beginning of next year, after the latter announced he was stepping back from fund management after 17 years in the industry. A number of industry commentators – and some of our readers – have voiced concerns that his appointment to the much larger Fidelity Special Situations will have a detrimental effect on his highly regarded Fidelity UK Smaller Companies fund.
The manager told FE Trustnet that although some people may question his ability to run a larger pool of assets, the process that has seen the small cap portfolio shoot up the performance tables will remain unchanged.
"Management of the Special Situations fund certainly increases the amount of assets I am responsible for, but it will not meaningfully affect how I go about the job day-to-day. I will use the same investment process on the same universe of stocks," he explained.
"I will be meeting the same companies and reading the same research. I have managed a multi-cap mandate alongside the smaller companies fund for over three years now, and this will continue, albeit with a larger pool of assets in the multi-cap mandate."
Despite Wright’s attempt to ease fears about his new manager roles, some people are still not convinced.
Rob Morgan, pensions and investment analyst at Charles Stanley Direct, says investors in the Fidelity UK Smaller Companies fund are right to be concerned about his new role as it could impact the amount of time he can dedicate to the portfolio.
"I think it is a very big job to undertake," Morgan said.
"He is a proven small cap manager but this looks like a big transition. Yes, he is an incredibly talented guy and Fidelity always promotes from within, which seems to work well. But I do share investors’ concerns."
"He has gone from running the relatively small fund to the very large Special Sits fund," he added.
Morgan says that Wright has shown in the past he can run large cap funds, especially as he is heading up the Fidelity Special Values investment trust, but he is concerned that the manager now has too much on his plate.
"I think he is a very capable manager, but the question is, has he been given too much? Because when that happens, it starts to impact on the ones he has already got."
"Yes, he has been running the Fidelity Special Values trust and yes he has got a few months before he takes over Special Sits, but I still think the concerns of Fidelity UK Smaller Companies investors are perfectly valid."
"I haven’t had a meeting with him yet and so I don’t know how much of an impact on his time it will have. Special Sits has done well but hasn’t been a stellar performer, so it isn’t a bad appointment for investors in that fund."
"However, I would be concerned if I were an investor in his Smaller Companies fund."
Wright has managed the now soft-closed Fidelity UK Smaller Companies fund since its launch in February 2008.
According to FE Analytics, it is the best performer in the IMA UK Smaller Companies sector over that time, with returns of 210.66 per cent. It has beaten its benchmark – the Numis Smaller Companies ex IT index – and the average fund by 122.82 percentage points and 144.21 percentage points, respectively.
Performance of fund vs sector and index since Feb 2008
Source: FE Analytics
The fund is also the top performer in the sector over one, three and five years.
It was soft-closed earlier this year at £250m to protect current investors; however Wright is now running £364m worth of assets under management. Rising markets have contributed to the size, as has the fact that new investors can still gain access via vehicles such as monthly savings plans.
Wright says he understands why current investors may be worried about the fund size, but he says that he and Fidelity have taken a number of steps to make sure it continues to deliver.
He commented: "In recognition of the growth in the amount of assets we are investing in UK smaller companies, we have recently increased our resources in this area. UK Smaller Companies co-fund manager Jonathan Winton is a talented smaller companies investor who was appointed in February."
"We have also recently assigned an experienced small cap analyst to specialise in UK medium and smaller companies, who will be a great asset to all three of my strategies."
"This is in addition to the five-strong Pan-European small cap analyst team which has been so instrumental to the success of the UK Smaller Companies fund thus far," he added.
Hargreaves Lansdown’s Richard Troue expects Wright to pass on the UK Smaller Companies fund to a more junior manager at some point, though Fidelity insists there are no plans in place for this to happen.
"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," Troue said.
