Fidelity International has launched a European Special Situations fund as part of its Luxembourg Sicav.
Managed by Fehim Sever, a former research analyst at Fidelity, the fund is unconstrained and targets companies where potential for growth or change is underestimated by the market. Its remit is broad and the expected tracking error is 8-12%.
The Fidelity Funds European Special Situations fund is based on an existing portfolio marketed to Canadian investors, which Sever has managed for the past 12 months.
From December 31, 2006, to December 31, 2007, the Canadian fund returned 18.1% compared with a 3.4% decline in its benchmark index (MSCI Europe), according to Fidelity.
Although the new fund will be similar to the Canadian version it will not necessarily hold the same stocks, says Miguel Corte-Real, investment director at Fidelity, who conducts analysis for the fund.
“We see opportunities in what we call new Europe – South-East Europe and Central Europe,” he says. “But the fund will invest in core Europe [also].”
According to Corte-Real, sectors of particular interest include industrials, materials and utilities. He adds that current market volatility is helping to create more opportunities.
“A lot of the valuations are based on sentiment,” he explains. “As the market becomes a little bit more [about] sentiment and fear, that creates opportunities for us to find mis-valued stocks and we will take advantage of that.”
When fully invested, the Fidelity Funds European Special Situations fund will hold 35-50 stocks. The sterling share class has an initial charge of 3.5% and an annual management charge of 1.5%.