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Fidelity Special Values: February 2023 trust update

In this trust update, Senior Investment Analyst Joseph Hill shares our analysis on the manager, process, culture, ESG integration, cost and performance of the Fidelity Special Values trust.

Important notes

This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.

This article is more than 6 months old

It was correct at the time of publishing. Our views and any references to tax, investment and pension rules may have changed since then.

  • Alex Wright's contrarian approach and focus on unloved companies differentiates the trust from some peers
  • The manager is supported by a large, well-resourced team of investment professionals
  • The trust has a good long-term track record, but it has underperformed the broader UK stock market over the past year
  • How it fits into a portfolio

    The Fidelity Special Values trust trust aims to grow an investment over the long term. The manager's focus on unloved companies differentiates it from many other UK-focused investment trusts, and it could bring diversification to the UK section of a broader investment portfolio. It could sit well alongside other UK trusts that focus on companies capable of growing earnings at a more consistent pace.


    Alex Wright has been at Fidelity since 2001. He started his career analysing European companies and has focused on UK companies since 2007. As an analyst, he worked closely with Anthony Bolton and Sanjeev Shah, the trust's two previous managers. We think it's positive that he learned his trade from such well-regarded investors.

    Wright became a fund manager in 2008, initially focusing on UK smaller companies, but later broadened his remit to include companies of all sizes. He's been lead manager of the Fidelity Special Values investment trust since 2012 and is also responsible for the Fidelity Special Situations fund, which he's managed since 2014. The two portfolios have a high degree of overlap, so we think this is a reasonable workload for an investor of Wright's calibre.

    He's supported by co-manager Jonathon Winton and Fidelity's broader team of over 400 investment professionals. We think Wright has the resources required to do his job well.


    Wright invests in large, medium-sized and higher-risk smaller companies that often go ignored by other investors. Maybe they've missed a profit target, or the management team made some unpopular decisions. Either way, he must believe the company is on the road to recovery. A company can recover in a variety of ways, such as introducing a new product line, expanding into new areas or hiring a new management team.

    Corporate strategy plays an important part in a company's recovery, so the manager spends lots of time meeting company managers. He also meets the clients and suppliers of the companies he invests in to better understand how the company does business.

    As the company improves, its share price should rise as other investors begin to recognise the change. As the price rises, Wright gradually takes profits and moves on to the next unloved opportunity. It's an investment style known as 'value' investing. Of course, not every company will recover, and some could fail altogether.

    Wight added to some of the trust's investments over the year to reflect higher levels of conviction. This included investments in the financials sector, AIB Group and Close Brothers. The manager thinks AIB Group is well placed to take advantage of the consolidation of the Irish banking industry and sees Close Brothers as a conservative, well managed business.

    Investors should be aware the trust can borrow money to invest with the intention of increasing returns (known as gearing), but this could magnify losses in a falling market and increases risk. At the end of the trust's last financial year in August 2022, gearing stood at 10%. The manager can also use derivatives, which if used, adds risk.


    Fidelity was founded in 1969 and is a global investment manager. The company remains privately owned, meaning its managers can focus on the long-term interests of investors rather than short-term shareholder demands. That's helped the firm develop an investment-focused culture, where investment ideas are openly discussed and debated, and information is shared amongst the firm's various teams.

    The company's scale means investment teams are well-resourced and fund managers are well-incentivised. We think it's positive that all Fidelity fund managers are incentivised based on the longer-term performance of their funds and investment trusts. We think this aligns their interests with those of investors.

    ESG Integration

    Fidelity has committed to improving its approach to environment, social and governance (ESG) issues in recent years. They've developed a structured engagement program which allows them to be more systematic in their engagement on environmental and social issues, become involved in more collaborative engagement initiatives and introduced ESG data into fund managers' quarterly reviews to raise awareness of ESG issues. The firm has also bolstered its dedicated ESG team, which writes regular ESG reports on companies held by Fidelity fund managers. The firm votes where it is possible to do so and quarterly voting reports are posted online, complete with rationales for votes against management and abstentions.

    While Fidelity has made strides forward, we think ESG integration is a work in progress and some managers don't implement ESG as systematically as others. Wright has always placed high emphasis on governance, but he began integrating environmental and social considerations more recently.


    The trust's annual ongoing charge to the end of August 2022 was 0.69%. Investors should refer to the latest annual reports and accounts, and Key Information Document for details of the risks and charging structure.

    If held in a SIPP or ISA the HL platform fee of 0.45% per annum (capped at £200 per annum for a SIPP and £45 for an ISA) also applies. The HL platform fee doesn't apply if held in a Fund and Share Account. As investment trusts trade like shares, both a buy and sell instruction will be subject to the HL share dealing charges within any Hargreaves Lansdown account.


    The trust's performed well over the long term. Its share price has risen 238.94%* since Wright became manager in September 2012, beating the FTSE All Share index's return of 106.45%. We think this is an impressive achievement, particularly as the manager's value-focused investment approach has been out of favour for much of this period. Investors generally preferred companies with the potential to grow earnings more consistently, otherwise known as 'growth' stocks. Past performance is not a guide to the future.

    Over the trust's last financial year to the end of August 2022 it delivered a return of -13.51% to investors, compared with a return of 1.01% for the FTSE All-Share index. Among the key detractors over the year were the trust's positions in motoring products and services company Halfords and beverage manufacturer and distributor C & C group. Halfords has warned about a difficult environment for businesses with the effects of rising inflation and declining consumer confidence. Oil & gas company, Shell and public services business Serco were among the main positive contributors to performance. Serco upgraded profit forecasts supported by a healthy contract pipeline.

    In the trust's financial year to the end of August 2022, total dividends paid to shareholders amounted to 7.75p per share. This is a 16.19% increase on the dividend per share paid in the previous year.

    At the time of writing the trust trades at a discount of 8.24% and has a dividend yield of 2.75% although remember yields are variable and aren't a reliable indicator of future income.

    Annual percentage growth

    Jan 18 – Jan 19 Jan 19 – Jan 20 Jan 20 – Jan 21 Jan 21 – Jan 22 Jan 22 – Jan 23
    Fidelity Special Values -3.06% 9.24% -6.72% 29.82% -4.48%
    FTSE All-Share -3.83% 10.67% -7.55% 18.90% 5.20%

    Past performance is not a guide to the future. Source: *Lipper IM to 31/01/2023.



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    Important notes

    This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.

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