Has Fidelity found Wright manager for Fidelity Special Situations?

Mr Shah took on Fidelity Special Situations in 2008 from Anthony Bolton, who had delivered outstanding returns with the fund which he ran for nearly 30 years.

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However, after Mr Shah made an initially strong start the fund suffered two years of poor performance largely due to a sizeable position in banks. The investment trust also didn't do well and last year Mr Shah handed over its management Mr Wright. Read our report on this

However, Fidelity Special Situations' more recent performance has been strong with the fund among the top 10 per cent of funds over one year buoyed by the recovery in banking shares and no exposure to mining companies. Between assuming management of the fund in 2008 and 31 July 2013 Mr Shah returned 52.1 per cent versus 31.2 per cent for the FTSE All-Share Index, and beat 84 per cent of his peers in the UK All Companies fund sector.

But Mr Shah says he had been planning to leave fund management for a while and the performance change relates to the contrarian nature of the fund which has periods of poor performance when the market goes against its style. "My decision to leave is personal because this role requires a 110 per cent focus but I am not prepared to give that level going forward."

Mr Shah will no longer be involved in fund management and after a sabbatical will return to Fidelity in the third quarter of 2014 in a part time role to train junior fund managers and senior analysts.

Mr Wright has an outstanding performance record with Fidelity UK Smaller Companies which is the top performing UK Smaller Companies Fund over one, three and five years. Since taking sole responsibility for Fidelity Special Values investment trust in September last year and the end of July 2013, he has returned 46.3 per cent against 21.6 per cent for the FTSE All-Share.

He follows the same contrarian/value approach for which Fidelity Special Situations Fund is well known, investing in unloved stocks which have limited downside risk and potential for positive change. He looks for shares which have already underperformed and have an element of downside protection such as cash, valuation and barriers to entry.

While his approach is similar to Mr Shah, differences include a slightly shorter average holding period of around 18 months, as opposed to Mr Shah's 24 months, while Mr Wright is less inclined to use derivatives such as options though has added value to his other funds with contracts for difference and shorting.

There is already some overlap in the positions the two managers hold. Their search for undervalued shares has led them to the same sectors, for example banks where they have large positions HSBC (HSBA) and Lloyds Banking Group (LLOY), which Mr Wright believes will be increasingly utility like.

They both favour fixed-line telecoms, media and pharmaceuticals, for example, both Fidelity Special Values investment trust and Fidelity Special Situations Fund are invested in GlaxoSmithKline (GSK) and Sanofi.

But the fund will not become a mirror of Fidelity Special Values investment trust, as the latter will invest more in small and mid-caps.

"The mandate of Fidelity Special Situations is a very different one, investing across the entire UK market, and the size of the fund is several times that of his UK Smaller Companies fund," says Jason Hollands, managing director at wealth adviser Bestinvest. "This is a very material increase in assets under his management and while his tenure to date on Special Values has been encouraging, it is not a forgone conclusion that his process will automatically successfully translate when applied to a broader universe of UK stocks. Alex Wright's approach is likely to be less aggressive than Sanjeev Shah's and Fidelity Special Values investment trust has seen 100 per cent stock turnover since Wright took over the mantle from Shah, albeit this is partially a result of the trust wanting to have a more differentiated portfolio."

Fund performance

Source: Morningstar as at 2 September 2013