Fidelity’s Alex Wright has revealed an intriguing source of help in keeping Fidelity Special Values (FSV ) ahead of the pack as the investment trust enters its fourth decade.

The £1bn UK equity fund celebrates 30 years since launch in 1994 under the care of investing supremo Anthony Bolton, who passed the mantle to Sanjeev Shah at the end of 2007 when he retired for the first time.

Five years later in 2012, Wright took the helm and has continued the long-term track record set by his predecessors in his 12-year tenure. Since launch the trust has grown its net asset value (NAV) an impressive 2,867% and the shares have enjoyed a rise of 2,648%, versus a 702% increase in the FTSE All Share index.

This equates to an annualised 12% total return every year since launch compared with 7.2% from the index, and Wright has kept the pace going, with an annualised 11.6% total return since he began.

‘Special sauce’

His contrarian, value stock picking has clearly stood him in good stead, Wright also highlighted the 500 company meetings he undertakes each year – equivalent to two a day – that help him unpick the pros and cons of potential investments.

In detailing his system, Wright disclosed that he has had some unusual training to prepare him for interrogating chief executives and getting to the nitty-gritty of a business: the CIA.

Or ex-CIA to be more exact.

Wright said he had received training from former US agents at the foreign intelligence agency to help determine when company bosses were telling the truth and get to the nub of issues with smart interviewing skills. Although the fund manager declined to detail what he had been taught, Wright believed certain questions were the ‘special sauce’ in his stock picking.

The investment trust’s performance relies on ‘looking at areas where others are not looking’ and Wright said while it is ‘always a bit contrarian to be a value investor, it has been more contrarian over the last 10 years’.

‘Ten years ago, value funds were 2% of people’s investable assets [in equities], and 10% of UK equity funds,’ he said.

‘Now, value allocation has fallen to 6% of UK equity funds and value is just 0.7% of total investment in equity funds. There is less money in value funds and so it has made the chance of adding idiosyncratic alpha [investment returns] higher.’

Wright claimed it was ‘hard to get an edge’ in growth stocks such as Apple and Tesla, but said in picking value stocks ‘you are only competing with maybe tens of other investors so the chance of finding something the market may have missed is higher’.

His search for something different means two thirds of the trust’s assets are held in stocks outside the FTSE 100. Among his top overweight positions are 3.4% in Keller (KLR), a ‘mid-cap’ FTSE 250 construction engineering group whose shares have shot up 92% this year. In August it reported a 121% jump in first half profits.

This is an ‘all-cap’ fund, however, with the FTSE 100 cigarette maker Imperial Brands (IMB) his second biggest overweight at 4.1% of the portfolio. In recent years the Winston and Golden Virginia brands owner had run out of puff, forced to hike prices to offset falling sales, but this year has restored investor interest in its vaping business with the shares rallying 24%.

We’ve beaten the Nasdaq

Wright admitted the trust’s performance did suffer in the decade-long growth bull run fuelled by near-zero interest rates after the 2008 financial crisis.

‘What is encouraging is over the last four years, since the height of the pandemic which was painful for value funds, we have had a four-year period where value has outperformed growth,’ he said.

‘People have not realised, but when you look at FSV versus the Nasdaq [the US technology index], we have beaten the Nasdaq in three out of the last four years. Absolute performance after a painful period is really good and may pick up.’

He said UK equities have been ‘holding their own’ but most investors ‘don’t seem to have noticed’.

In the past five years Special Values shareholders have enjoyed a 43.4% total return, one of best performances of a UK equity investment trust that beats the 32.7% peer group average and the All Share’s 36.5%. 

‘UK underperformance is in the rear-view mirror,’ he said, adding that it is ‘not starting to correct its undervaluation yet’.

UK stocks are still trading at a large discount to global peers and have derated further despite the UK market recovery. Wright said this proved that the outperformance in UK companies was based on earnings rather than a rerating and growth for 2025 and 2026 still remained ‘incredibly attractive’ with ‘value across all markets’.

‘It’s disappointing that despite good performance and value in the UK, investors are still taking their money out,’ he said.

‘It’s negative for funds and the wrong thing to do, you’re selling a cheap market to buy expensive markets of the US and global equities.’