Fund Analyst Rating: Fidelity UK Smaller Companies

Updated : Sep 06, 2019 in Articles

Fund Analyst Rating: Fidelity UK Smaller Companies


Welcome to the Morningstar manager check-up,
for the latest updates from our manager research team. We start with Fidelity UK Smaller Companies
managed by Alex Wright and Jonathan Winton. The process here was devised by Wright and
looks for stocks with unrecognised growth potential that offer strong downside protection.
In terms of day to day management, it’s become clear that Jonathan Winton has become
more influential since Wright took on the Fidelity Special Situations fund about three
years ago. Although Winton is inexperienced compared with peers in this space, we see
continuity in execution of the process. There’s also a wider analyst team at Fidelity that
can be called upon. The fund remains soft closed and we reaffirm our Morningstar analyst
rating of Bronze. Next up is the Man GLG Undervalued Assets
fund run by Henry Dixon. What we particularly like is the highly-disciplined process and
strong execution, making this a compelling choice for investors. Although this was launched
in 2013, our conviction has been built over a longer time frame through Dixon’s previous
mandate using the same process. His thorough balance sheet analysis looks
to identify two types of stock: those trading below his estimate of the company’s asset
value and those where the company’s profit stream is being undervalued relative to the
cost of capital. The fund had a tough year last year but is already bouncing back in
2017 and we believe in the ability to generate strong risk adjusted returns. So the fund
maintains its Silver Rating. Finally, we have the JP Morgan China fund,
that’s been managed by Howard Wang since the start of 2016. He’s something of a veteran
in this space, having run other mandates in the region, and since taking over has implemented
his secular growth investment process. Wang targets companies with strong earnings
or cash flow growth, robust business models with barriers to entry, and a favourable competitive
landscape. The fund underperformed last year which isn’t surprising given his style was
out of favour and value stocks rallied. What we observe today when analysing his portfolio
is that he remains true to his style, with overweights in the healthcare and consumer
discretionary sectors. With our confidence in Wang and his process, plus competitive
fees, we maintain our Bronze Rating on this fund.

Leave a Reply

Your email address will not be published. Required fields are marked *