The new fund will have an unconstrained approach, enabling it to invest in companies of any size anywhere in the world. Although it will be benchmarked against the MSCI World Index, stock selection will not be bound by it in terms of sector or geographical weightings.
The fund will be managed by Anthony Bolton from launch but will to be handed over to his successor, Jorma Korhonen, in January 2007.
Korhonen has spent the past 10 years at Fidelity, including six years as an analyst. He was personally selected by Anthony Bolton to run this fund as well as Fidelity special situations once Bolton begins his new mentoring role at Fidelity.
Korhonen is a bottom-up stockpicker who takes a contrarian approach to investing. He will look for companies hat have been mispriced so that their market valuations are lower than the manager feels they deserve.
Although Korhonen will be able to draw on the resources of over 600 analysts and fund managers in 10 different countries, he will conduct a lot of the research himself. This will involve analysing business models to understand how they will be affected by different economic conditions and which elements of the business are within or outside the management’s control before deciding on a target price for the stocks.
Common characteristics of stocks that will make the portfolio include restructuring, the market failing to recognise the company’s growth potential, industries going through change and cyclical turns within industries.
Fidelity says that when Bolton’s original special situations fund launched in 1979, the MCSI World Index comprised 17 countries, but it has grown to 49 countries. As a result of globalisation, where the world has become closer to home due to airline travel, the internet and more companies operating on an international basis, geographical boundaries are breaking down. In Fidelity’s view, this means global funds are more relevant than they were and the ability to invest further afield opens up greater choice for investors within industrial sectors.
Fidelity already has special situations fund focusing on the UK, the US, Japan and Asia, so it seems logical to channel its experience into a global fund. However, Korhonen has a lot to prove as Bolton’s successor, although Bolton’s view that he is the best manager to succeed him should carry weight among IFAs. Even so, some advisers may adopt a wait and see approach before recommending this fund to their clients.