Fidelity China Special Situations

Last updated 09 September 2019

Fidelity China Special Situations has outperformed its index by over 20% in five years...

Disclosure – Non-substantive Research

This is not substantive investment research or a research recommendation, as it does not constitute substantive research or analysis. With this commentary, Kepler Partners LLP does not intend to influence your investment firm's behaviour. 

Fidelity China Special Situations

Fidelity China Special Situations (FCSS) invests in Chinese equities, aiming to identify companies with long-term growth prospects that are underappreciated by the market. The portfolio has a strong bias to small and mid caps and a wide remit. This allows it to invest in domestic and Hong Kong-listed Chinese companies as well as those listed elsewhere which do business with the country and unlisted, private stocks. The portfolio can also take up short positions in companies or indices.

The trust has been managed by Dale Nicholls for just over five years, during which time it has handsomely outperformed the MSCI China index [see performance section for more]. Dale invests in companies benefitting from the growth of the middle class in China, which means the portfolio is tilted towards consumer-facing companies, information technology and insurance.

The trust has structural gearing worth 10% of NAV and a track record of maintaining borrowings closer to 25%. Along with the SMID exposure this raises the volatility on the trust: over five years the standard deviation of the Fidelity China Special Situations share price has been 23.2% annualised, compared to 19.08% for the MSCI China benchmark.

The trust trades on a discount of 9.3%. Since February 2019 the board has targeted a single digit discount, and used its buyback authority to that effect.

While the trust aims for capital growth, dividend growth has also been strong, and the trust now yields 1.8%.

The trust has an innovative charging structure. There is a base management fee of 0.9%, which can be 0.2% higher or lower depending on whether the trust has outperformed or underperformed the index, a “fulcrum fee”.

Thomas McMahon
Thomas is a senior investment trust analyst and joined Kepler in April 2018. Previously he was senior analyst at FE Invest, where he was responsible for fund selection for a range of model portfolios. He covered all asset classes over time, but has particular experience with emerging markets and fixed income as well as UK smaller companies funds. He has a degree in Philosophy from Warwick University and is a CFA charterholder.

Fund History

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Key facts

Investment objective

To achieve long-term capital growth from an actively managed portfolio made up primarily of securities issued by companies listed in China and Chinese companies listed elsewhere.

As at:

30/08/2019

Group/Investment

Fidelity China Special 

Ticker

FCSS

Management Company

Fidelity (FIL Fund Management Limited)

Manager Name

Dale Nicholls

Association of Investment Companies (AIC) Sector

Country Specialist: Asia Pacific ex Japan

12 Mo Yield

1.8%

Dividend Distribution Frequency

Annually

Latest Market Capitalisation

£1,172,316,715

Latest Net Gearing (Cum Fair)

26%

Latest Ongoing Charge Ex Perf Fee

1.02%

Turnover Ratio %

37.2%

Shares Outstanding

 549,094,480

(Discount)/ Premium (Cum Fair)

-9.3%

Daily Closing Price

213.5p

Source: Morningstar

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