Spare a thought for investors in Fidelity UK aggressive. A couple of years ago, Fidelity was parading its new star manager Sanjeev Shah in front of IFAs and journalists. Shah was even dubbed “Fidelity’s stockpicking crown prince” in one newspaper and the attention paid to Shah naturally gave the impression that Fidelity believed he could take over Bolton’s mantle.
Sales of the fund soared as Shah’s contrarian stockpicking skills pushed the fund towards the top of the performance tables. Then, after months of promoting Shah, investors suddenly discovered he was no longer going to run their fund. He was off to manage a European fund and Mark Hodges was put in charge of his first retail fund.
At the time, it was seen as an indication that Shah was being groomed for the top job, the rumour being that he had been put in charge of a billion-pound-plus fund to get used to managing big money. So it came to pass. Shah has been confirmed as Bolton’s successor and Fidelity has been happy to boast about his credentials.
“Sanjeev Shah is the natural choice of successor to Anthony. As manager of Fidelity UK aggressive, he delivered top-quartile performance through a contrarian and value approach to investing,” says the press release.
It bodes well for investors in Fidelity special situations but it may leave a bitter taste in the mouth of UK aggressive investors who bought the Shah story. Since he stepped down at the fund, it has languished in the third quartile, returning 33 per cent compared with the sector average of 36 per cent.
It is a crucial time for Fidelity. UK aggressive is one of several funds that have suffered of late and, for the first time, the UK’s biggest fund company is under the spotlight. Performance has tailed off alarmingly. No fewer than 19 of its 32 funds available to retail investors have underperformed the average fund in their sector over the past year.
Some of its biggest funds have delivered fourth-quartile performance, including its £1.4bn American fund, £4.7bn European fund and £807m UK growth fund. If you disregard its cash fund, only one – multi-manager income – has achieved first-quartile performance in the past year. Many financial advisers (who are responsible for four out of five Fidelity funds sold) are becoming restless and say they are taking their custom elsewhere.
Fidelity reckons many IFAs are talking the talk rather than walking the walk and outflows are not as significant as the soundbites suggest. It has attacked IFAs for being short-sighted. Chief investment officer Michael Gordon says: “I would hope that IFAs would take a longer-term view. It is easy to look elsewhere at a time such as this [Bolton’s retirement].”
He admits that 2006 was “not its best year” and blames missing the largecap cycle last summer. He says several funds were hit when online gambling stocks plummeted in value.
“Last year was poor and the first trading day in October, when gaming stocks fell, marked a low point for us but I am puzzled that IFAs have taken against our European fund, in particular. Tim McCarron has a strong track record and made a call which went against him. People forget that Anthony Bolton underperformed on many occasions too,” says Gordon.
Certainly, my quick poll of 15 IFAs proved inconclusive. Many say Fidelity will roar back and describe 2006 as a blip although more than half admit they have taken funds off their panel.
Fidelity will be breathing a sigh of relief that the Bolton drama is almost at an end and that the vast majority of IFA commentators have welcomed the appointment.
It would appear that UK special situations is in good hands but now Fidelity needs to address its other big funds, UK growth, American and European. It might have a look at UK aggressive, too.
Paul Farrow is money editor at the Sunday Telegraph.