The Fidelity Special Situations funds, long overshadowed after the departure of their legendary manager, are showing clear signs of a strong upturn. The UK-based fund that retains the original name, along with the Fidelity Special Values (LSE: FSV) investment trust that follows the same strategy, has consistently outperformed the UK market over the past three years under managers Alexander Wright and Jonathan Winton. Meanwhile, the Fidelity Global Special Situations Fund delivered a 19.1% return in sterling in 2025, comfortably beating the 13.9% return from the MSCI ACWI index.
The Bolton legend and the long shadow
Anthony Bolton remains a towering figure in fund management. Over 28 years – from December 1979 to December 2007 – he generated a compound annual return of 19.5% from the original Fidelity Special Situations Fund, outperforming the market by roughly 6% each year. A £1,000 investment at launch would have grown to approximately £147,000 by the time he stepped down. His approach was deeply contrarian: he bought what others feared, held what others doubted, and sold when they finally agreed. He focused on unloved companies with strong balance sheets and cheap valuations, often looking for turnarounds before the market recognised their potential.
Bolton placed heavy emphasis on behavioural science and self-awareness. He advised keeping an open mind, thinking independently, and understanding one’s own temperament and blind spots. He developed tools such as the “investment totem pole” to rank holdings by conviction and avoid artificial conviction born from price momentum. He also favoured simplicity – investing in straightforward business models rather than complex structures. Notably, during the IT bubble, his funds had no exposure to the technology sector, instead concentrating on classic industrial companies, a stance that proved prescient when the bubble burst.
When Bolton retired in 2007, the fund was split into two: one focused on the UK and one on international markets. Sanjeev Shah took over the UK fund in January 2008. The post-Bolton period saw significant redemptions – £335m was withdrawn from the Special Situations fund and £508m from Global Special Situations in 2007 alone, though outflows slowed the following year. For years the funds remained out of the limelight under a succession of managers.
Resurgence under new management
That picture has now changed. The Fidelity Special Values investment trust, managed by Alexander Wright and Jonathan Winton, has been the best-performing trust in the AIC UK All Companies sector over the 12 months to 31 March 2026. Over five years to 5 December 2025 it outperformed its benchmark, its peers, and even the US tech-heavy Nasdaq Composite Index. The trust typically holds between 80 and 120 stocks, with an active share of around 80%. It uses contracts for difference for gearing – a more cost-effective method than traditional borrowing – with gearing levels varying between 6% and 14% historically, though it was reduced to roughly 3.4% at the end of October 2025 after a period of strong performance. The trust is expected to pay a dividend of 10.2p for the 2025 financial year, an increase of about 7% year-on-year, giving a prospective yield of around 2.5%.
The Fidelity Global Special Situations Fund is now co-managed by Christine Baalham and Tom Record, who took over in 2024 after Jeremy Podger retired from fund management at the end of March that year (Podger remains a senior adviser to Fidelity International). Baalham describes the fund as “style agnostic”, driven by stock selection rather than macroeconomic calls. “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.” The fund is diversified across 88 holdings, with none exceeding 3% of the portfolio.
The bottlenecks strategy: where the real rewards lie
While the fund continues to seek contrarian ideas with hidden value – a key part of Bolton’s legacy – Baalham and Record are focusing heavily on what they call “bottlenecks” in the technology supply chain. Their exposure to artificial intelligence, they argue, is best captured not through the obvious names but through the constraints that will shape the industry. “The rewards are in the bottlenecks,” says Baalham, “which are memory and power.”
The fund holds a 2% position in Nvidia – 2.7 percentage points underweight at the end of the quarter – and does not hold Apple at all, with Baalham noting that Apple trades on nearly 30 times earnings. This positioning could hurt relative performance in the current quarter given Apple’s 30% gain and Nvidia’s 14% gain. But Baalham points to other holdings that offer AI exposure through the bottlenecks. One example is Samsung, held because a shortage of memory chips has delayed the launch of the PlayStation 6. Data centres are driving increased demand for energy, which explains investments in Siemens Energy, NextEra Energy, and SSE. The fund also keeps an eye on quantum computing, which has the potential to significantly reduce power requirements in the future.
Another bottleneck identified is analogue semiconductors, which manage the interface between humans and machines. “With no spare capacity, prices will rise when demand in these markets picks up,” says Baalham. The fund holds STMicroelectronics on this thesis. “We are finding some really interesting ideas caused by technology advances while other investors seem to be focused on geopolitics,” she adds.
The contrarian thread also runs through holdings such as Bayer. Baalham notes that pharmaceutical analysts often overlook the agricultural sciences half of the business. Yet Bayer has “some really good pharmaceutical products”, and its crops business is nearing a resolution of litigation and includes a high-quality seeds business. The stock trades on less than nine times earnings.
On oil and gas, the fund is neutral but holds US producer Diamondback Energy, services company Baker Hughes, and liquefied natural gas exporter Cheniere Energy. Diamondback Energy, which focuses on the Permian Basin, has faced an antitrust lawsuit filed in January 2024 accusing it and other producers of an illegal price-fixing scheme, and was also accused in October 2023 of being a major contributor to increased flaring in the Permian Basin. Baker Hughes, a global energy technology company operating in more than 120 countries, is committed to achieving zero-net carbon emissions by 2050 and manufactures equipment used in hydrogen production, geothermal energy, and carbon capture.
Underpinning the fund’s research capability is Fidelity’s global team of 139 equity analysts, who support Record and Baalham. Between them they oversee £3.6bn in the Global Special Situations fund, plus another £6bn alongside.
It is a pity that the duo do not 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.
