City concerned over Fidelity’s fund split

Listen to this article

00:00
00:00

Fidelity, the international fund manager, came under further criticism on Tuesday for asking investors to vote on a significant split of its flagship fund, without revealing who would manage one of the new funds alongside pioneer Anthony Bolton.

On Monday, Fidelity announced plans to split in half its flagship Special Situations fund, the UK’s largest and most successful investment fund, amid concerns that the growing size of the £5.4bn ($10bn) fund could limit investment opportunities among small and mid-cap stocks.

In a move designed to end investor uncertainty, the fund management group also revealed that Mr Bolton, who launched Special Situations in 1979, would stay on until the end of 2007, a year longer than expected, to manage one of the newly-split funds.

Mr Bolton said the fund’s 250,000 investors would know the investment brief of the second fund – likely to be extended to cover European equities – and which fund he would be managing, by the time they voted on the proposal early next year.

However, the fund manager sparked concern within the City after it revealed it would not announce who would run the second fund until after the vote.

“This puts everyone in a tricky situation,” said Justine Fearns, investment manager with Chase de Vere, the independent financial adviser.

“I do find that unnecessary for the client and for us. Lots of people will be lobbying to get more information and they will want attention given to this.”

Mr Bolton yesterday defended the decision to delay an announcement on the second fund manager, saying it was too early to make a decision before the investors’ vote.

“We don’t like very long handover periods and we don’t like picking someone today as it might be different to who you pick in two years’ time,” said Mr Bolton.

“This decision will be made six to nine months before the handover.”

Mr Bolton also defended claims from the City that splitting the fund would fail to tackle the issue of the fund’s size.

“It’s not that we can’t run large funds,” said Mr Bolton. “But at some stage you run out of ideas and I am keen to avoid that and take action before that happens.”

Fidelity also announced it would be increasing the initial fees on the Special Situations fund from 3.5 per cent to 5.25 per cent with immediate effect for new investors.

Copyright The Financial Times Limited 2017. All rights reserved. You may share using our article tools. Please don't copy articles from FT.com and redistribute by email or post to the web.