Fidelity International launches UK Opportunities Fund
Fidelity International is to launch a new UK equity fund, UK Opportunities, to invest primarily in small cap companies with unrecognised growth potential.
Fund manager Alex Wright, who has run an institutional version of the fund since 2008, will look to invest in companies that have already underperformed and where the value in potential change and recovery is not recognised.
He will buy companies that are unloved and where he believes further downside is both quantifiable and limited. By building a portfolio of stocks that are in different stages of their recovery process, the intention is to deliver outperformance across different market environments.
Wright will invest at least 80% of the fund in smaller companies because that is where he finds the most opportunities with the risk/return characteristics he is looking for. He also has the ability to invest up to 20% of the fund in mid and larger cap companies.
The fund's benchmark will be Hoare Govett Smaller Companies ex-IC. Wright will hold around 100 stocks in the fund with the largest stock position expected to be about 4% of the fund. It will be part of the IMA UK Smaller Companies sector.
The institutional version of the fund has beaten 96% of IMA UK smaller companies funds, returning 76.7% over tenure.
Fund manager Alex Wright says: "The stock market is inefficient at pricing companies that have gone through a troubled period and are consequently unloved and out of favour. This is particularly the case for smaller companies where a lack of research can often combine with market scepticism to leave many companies trading below the true value of their franchise.
"It is often only when an improvement in a company's trading is visible that the market moves to re-price future growth prospects."
Ben Waterhouse, Head of UK Retail Sales at Fidelity International, adds: "Small caps offer a number of key advantages for investors seeking returns. Large companies are well covered, which can make it harder to find an edge. By going down the cap scale, there is a good chance of uncovering a gem others may have missed. Fidelity is very well placed to find those hidden gems given the strength of its bottom-up research team.
"UK Opportunities is run by a fund manager who has already demonstrated his ability to add value in the institutional market and we are pleased to be able to bring this offering to the retail market."
Wright has nine years experience at Fidelity International having started his career at Fidelity in 2001 as analyst covering a range of sectors including UK small caps in 2007-08. In March 2008, he became fund manager of the Inst UK Smaller Companies fund and has assisted Sanjeev Shah on Fidelity Special Situations. He also has BSc (Economics) from Warwick University (1st class hons).