March 31, 2013 4:31 am

Fidelity readies for the big sell

Fidelity’s Jeremy Podger says the group is ready to start promoting his £1.5bn Global Special Situations fund to investors again, after transforming its performance with a complete portfolio overhaul.

Mr Podger has delivered top-quartile returns since taking over the struggling fund 12 months ago.

“The first objective was to reset the course of the fund with minimum disruption,” Mr Podger says.

“In September 2012 we sold about 60 per cent of the portfolio – holdings that had done well but could be subject to setbacks – and then got it into shape,” he says.

“Since then, turnover on an annual basis has been about 70 per cent, depending on markets and what the opportunities are.”

The manager was hired from Threadneedle a year ago to replace the fund’s former manager Jorma Korhonen, who left behind a poor performance record when he exited in late 2011.

Mr Korhonen had managed the fund since it was first formed when the giant Fidelity Special Situations fund, managed by Anthony Bolton, was split into global and UK products in 2006.

But it then went on to lose 5.7 per cent under Mr Korhonen compared with a gain of 13.1 per cent from the IMA global sector average and an MSCI AC World index rise of 19 per cent, according to FE data.

Mr Korhonen’s returns suffered due to overexposure to European equities during the 2007-08 financial crisis. The size of the fund has fluctuated from £2bn in May 2010 down to £1.3bn in June 2012.

Its three- and five-year numbers remain in the bottom quartile, but Mr Podger has steered it to top quartile in the past 12 months, returning 17 per cent compared to 13.1 per cent for the IMA global sector.

Mr Podger says the fund had seen “two-way” flows for some time – as any new investments were matched by investor outflows – but the group is now ready to promote the Global Special Situations fund again.

“We had seen quite a gradual slowdown – it’s quite a mature fund. We didn’t go out and talk to people until the fund was positioned how we wanted.”

In terms of asset allocation Mr Podger says he was “very comfortable” positioning more than half the fund in the US because he believed the economy was rebounding as deficits fell.

Major stock weightings include US investment bank Citigroup. Mr Podger expects US financials to outperform their European counterparts with loan volumes stabilising.

“Everyone is worried about capital and Citigroup has a surplus,” he adds. “Since the fourth quarter of last year it’s done pretty well.”

Elsewhere, the manager says that he believed there were fewer value opportunities available on the stock market following its recent rallies.

“I am fussy about valuations,” he says.

“There are not quite as many bargains around as there were but it’s interesting that some parts of the market have stayed very cheap, with cyclical emerging market stocks going nowhere.”

Mr Podger’s appointment at Fidelity coincided with other hires designed to turn around poor-performing funds at the group, including Dominic Rossi as Fidelity’s global equity chief investment officer in 2011.

Eleanor Lawrie is a reporter at Investment Adviser

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