It’s difficult for many investors – even professional ones – to beat their benchmark. In fact, many actively managed funds have failed to stand the test of time, disappearing from the market.
But some heavyweights have sticking power. One of these is Fidelity Special Situations, formerly managed by Anthony Bolton. It has done investors proud through numerous market cycles and two manager changes.
The Morningstar Silver Rated fund was initially launched in 1979 and was managed by Bolton, one of the most famous UK investors in history, until the end of 2007. Bolton was replaced by Sanjeev Shah in 2008, before he was succeeded by current manager Alex Wright.
The fund became so popular – at one point it was the largest in the UK – that it had to be split up in 2006, with a new fund, Fidelity Global Special Situations, created when Bolton announced his retirement.
For investors who were lucky enough to invest on day one and hold until the present day a £10,000 investment in 1979 would now be worth almost £3.7 million.
For the latest instalment of our active versus passive manager comparison, we have looked at the performance of the fund with a similarly rated index tracker in the Investment Association UK All Companies sector. For this, we picked the longest running we could find, which happens to be from the same stable – Fidelity Index UK.
Spectacular Performance
The index fund’s inception date is 31 January 1996. The comparison, then, begins in early 1996. From then until Bolton’s retirement, Special Situations returned a huge 480%, trouncing the passive’s 159%.
The first three of those years, though, were inauspicious. In fact, Bolton underperformed between 31 January 1996 and 31 January 1999 – the tail-end of the dotcom bubble – and returned 47% compared to the index fund’s 72%.
Of course, over the next four years – during which time the dotcom bubble spectacularly burst – Bolton managed a gain of 52%. The index fund, on the other hand, lost 32% of its value.
From 2003 until Bolton stepped back at the end of 2007, performance was more equal, though the active offering still outperformed, 159% compared to 120%.
Since Bolton left the running of the fund, performance has been less spectacular, though it has still held up ahead of the index fund’s returns.
Fidelity Special Situations has since had two different managers. During both Shah’s six years and Wright’s four and a half, Fidelity Index UK has returned roughly the same amount – 35%. While Shah has clearly had 18 months more than Wright, his stint at the helm produced better numbers than his successor. Shah returned 60%; Wright 44%.
Bolton went on to return to fund management to run the newly launched Fidelity China Special Situations trust (FCSS) for four years from April 2010, narrowly outperforming the MSCI China GR Index 5.25% to 3.1%.
His successor, Dale Nicholls, has transformed results since taking over, with returns of 139% more than double that of the index.
