View more on these topics

A very special sit

In all our deliberations about special situations, the most successful UK investment fund of the past 25 years, our primary objective has been as clear as it has been constant – how might we best serve the interests of the existing 250,000 shareholders and create the optimum conditions to continue its long-term performance.

It was with this goal in mind that we published our proposals last week for the restructuring of special situations. These proposals, which we view as innovative, seek to address two challenges: the size of special situations (5.41bn at the end of July) and the succession to Anthony Bolton’s long tenure as fund manager.

Doing nothing was not an option and after much careful consideration we decided that the following combination of measures would be the best way forward. First, we plan to split special situations into two equally sized funds.

This is designed to forestall any performance issues that might arise if the fund would to continue grow at its current rapid rate.

Second, we have impose a higher initial charge of 5.25 per cent on new contributions to the fund, except for regular contributions from investors with existing monthly savings plans. We hope that this will slow flows into the fund and so head off any issues linked to size.

In addition, we have clarified our plans for management succession. As some of you may recall, Anthony Bolton gave a commitment in December 2004 that he would continue to run special situations until the end of 2006.

Anthony has now extended his commitment to running money for a further year until the end of 2007. Investors will get an extra year of Anthony for half of their assets – and Anthony will then move into a new role within investment management.

Fidelity is breaking new ground with these proposals and, as with anything new, they were bound to raise questions. We welcome the debate about our plans – our purpose in announcing our intentions at such an early stage – don’t forget that Anthony will continue running money for a further 27 months, about the same as the average tenure of a UK portfolio manager – was to give shareholders and advisers full opportunity to digest the information.

Sure, the proposals are complex. They could not be otherwise, given the size and success of special situations. The multiplicity of wrappers through which investors are able to invest in the fund has added yet a further layer of complexity. And yes, there is more information to come. We are, after all, at the beginning of a process that will take the best of three years to completion.

We have also been pleased to receive so much support from our distribution partners to implement these measures, particularly those to ensure existing monthly savers do not pay the higher charge.

From the start, it has been our firm intention that all existing monthly savers should not be subject to the higher initial charge. But to do this for non-Fidelity clients, we are dependent on our partners – they are the only ones who can identify whether their clients are existing monthly savers. It is pleasing to note that virtually all our partners have been able to do this.

And what could more clearly demonstrate our desire to protect the interests of existing shareholders than our decision to pay a sum equivalent to the additional revenue raised from the higher initial charge of 5.25 per cent back into special situations? This means that shareholders benefit, not Fidelity.

In addition, Fidelity itself is bearing a considerable amount of cost arising from the split of special situations.

So what of the question of succession? Many advisers will remember that we have been here before, when Anthony handed over the stewardship of his European funds two to three years ago. Tim McCarron has continued to produce first-quartile returns on the Fidelity European. The fund is first out of 86 funds in its sector over three years.

The handover of the European funds serves as a blueprint for the handover of the two funds that would result from the split of special situations.

Advisers may also recall that, in the case of the European funds, we set an industry precedent by giving six months’ notice of the new manager and we intend to give a similar period of notice for the manager who takes over one half of special situations at the end of 2006.

Recommended

Sub-prime ministering

It’s sub-prime time again as an FSA probe claims to show compliance shortcomings by brokers. Nicola York investigates the controversy-hit sector

Syndicate Asset seeks Aim listing

Syndicate Asset Management – a strategic investment company seeking to build a fund management firm by consolidating smaller fund managers – is seeking an Aim listing after raising 33m in pre-IPO financing.

Earls joins FSSC board

Trade Union Amicus research section head John Earls is joining the Financial Services Skills Council board. Earls will join other directors of banks, buildings societies and representatives of trade unions and HM Treasury, sitting alongside chair David Prosser. Earls says: The work completed by the Skills Council during its first year of operation is something […]

Citizens Advice wants OFT to probe payment protection

Citizens Advice is calling on the Office of Fair Trading to investigate payment protection insurance, claiming it is bad value. The consumer organisation says the product, which produces annual revenues in excess of 5bn, is often highly expensive and excludes many of the most common situations that lead to debt problems. It claims that banks, […]

Boosting our annuity strategies

Targeting annuity purchase in lifestyle strategies isn’t anything new but we’ve just lifted the bonnet and injected an enhancement shot into the end-point of these solutions. The recent volatility has shot short-term volatility into equity markets and painted a very turbulent backdrop but we’re also equally faced with a stressed fixed interest environment. This can […]

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

    Leave a comment