Anthony Bolton remains a legend among fund managers. In the 28 years in which he managed the Fidelity Special Situations Fund, he generated a compound investment return of 19.5% – 6% ahead of the market. His style was primarily contrarian, investing in stocks ignored or disdained by most investors.
When he stepped down in 2007, the fund was split into two: one investing in the UK and one internationally. Thereafter, the funds left the limelight under a succession of managers, but there are strong signs of an upturn.
The UK fund that retains the Fidelity Special Situations name – and the Fidelity Special Values (LSE: FSV) investment trust that follows the same strategy – has steadily outperformed the UK market for the last three years under managers Alexander Wright and Jonathan Winton. More recently, the Fidelity Global Special Situations Fund is also outperforming, with a 19.1% return in sterling in 2025 compared with a 13.9% return for the MSCI ACWI index.
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Today, the global fund is “style agnostic”, says Christine Baalham, who took over as co-manager with Tom Record in 2024. Still, it is driven by stock selection rather than broader factors. “I'm not going to pretend I can call the market outlook,” she says. “I could be fabulously optimistic or terribly pessimistic depending on which view of the world I go for. There are reasons to be excited and reasons to be fearful.” Few managers put it so well.
Growth is sought “where the opportunity is much greater than the market believes”, but Anthony Bolton's search for contrarian ideas with hidden value is not neglected. Take Bayer, which is covered by pharmaceutical analysts who hate the agricultural sciences half of the business, says Baalham. Not only does Bayer have “some really good pharmaceutical products”, but “the crops business is nearing a resolution of litigation and includes a high-quality seeds business”. It trades on less than nine times earnings.
Fidelity Global Special Situations Fund: rewards in bottlenecks
The Fidelity Global Special Situations Fund portfolio is diversified: none of the 88 holdings is above 3%. The fund's 2% holding of Nvidia was 2.7 percentage points underweight at the end of the quarter and it didn't hold Apple (which is 4.2% of the index) at all: the stock is trading on nearly 30 times earnings, notes Baalham. This could be a problem for relative performance in the current quarter, given Apple's 30% gain and Nvidia's 14% gain. But Baalham says their AI exposure is covered with other holdings. “The rewards are in the bottlenecks,” she says, “which are memory and power.” The launch of Playstation 6 has been delayed by a shortage of memory chips – hence a holding in chipmaker Samsung. Data centres are creating more demand for energy, so the fund is invested in Siemens Energy as well as NextEra and SSE. However, “we keep an eye on quantum computing”, which has the potential to significantly reduce power requirements.
Another bottleneck is in analogue semi-conductors, which manage the interface between humans and machines. “With no spare capacity, prices will rise when demand in these markets picks up.” A holding in STMicroelectronics is based on this thesis. “We are finding some really interesting ideas caused by technology advances while other investors seem to be focused on geopolitics.” Conversely, the fund is neutral on oil and gas, although it holds US producer Diamondback Energy, services company Baker Hughes, and liquefied natural gas exporter Cheniere Energy.
As in Anthony Bolton's time, the close relationship between managers and analysts is a key strength at Fidelity. Record and Baalham are supported by a global team of 139 equity analysts. They oversee £3.6 billion in Global Special Situations, plus another £6 billion alongside.
It's a pity that the duo don't also run an investment trust, since these tend to outperform sister open-ended funds run by the same manager. Directors of serially underperforming global trusts, take note.
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