Special sits funds revamp portfolios

Two British special situations funds have made substantial changes to their portfolios in recent months.

Fidelity Special Situations has turned over many of its significant holdings since splitting in two in September. Meanwhile, the new manager of the Jupiter UK Special Situations fund has transformed its portfolio.

Last week Fidelity revealed the top 10 holdings of Anthony Bolton’s fund for the first time since the split. Five of the top 10 at the end of August have been replaced. Vodafone, J Sainsbury, Shire, Statoil, BG Group and Premier Farnell have taken the places of AstraZeneca, GlaxoSmithKline, Roche, ITV and Standard Chartered.

The fund has also become less concentrated. Its top 10 positions now make up 29.6% of the fund, compared with 35.6% three months ago. As at November 31, the fund had 3.06bn in assets.

At Jupiter, Ben Whitmore, manager of the 135m UK Special Situations fund, has turned over about 70% of the portfolio since taking it over from Paul Sheehan on November 11.

Whitmore, former manager of the Schroder Recovery fund, estimates he has added almost 30 new holdings to the portfolio and fully sold about 20. He has also reduced the number of holdings in the portfolio from about 55 to 45.

Whitmore says he has refocused the fund to make it more like Schroder Recovery, which he had managed solely since 2000.

He says: “In refocusing the fund I have taken the view that, at the moment, the more out of favour stocks are at the larger end of the market capitalisation scale.”

As such, about 80% of the portfolio is now invested in FTSE 100 companies.

Similar to his approach on Schroder Recovery, Whitmore buys companies that are out of favour with the market. That is, companies that are lowly valued on seven-year average earnings, but have strong franchises and healthy balance sheets.

“On valuation grounds, the areas of the market I am most keen on are telecoms, media, technology and life assurance.” he says. “These areas now offer more value than the traditional value stocks such as tobacco, property and utilities.”

Whitmore has added companies such as Royal Dutch Shell, Legal & General and Cable & Wireless to the fund since taking over.