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Fidelity Global Special Situations By Rob Griffin
Jorma Korhonen has an unenviable task. As one of the anointed successors to legendary fund manager Anthony Bolton, he can guarantee that every move he makes at the helm of the Fidelity Global Special Situations portfolio will The 40-year-old Finn has been one of the main beneficiaries of Fidelity's decision to split the £6.5 billion assets of Bolton's hugely successful Special Situations fund between the original UK-focused portfolio and a new global product. "I am extremely honoured that I've been asked to take over this fund and am very excited about the opportunity," he says. "I think it's a phenomenal product and I hope that people will be able to judge me on my own merits." Bolton, who has been managing both products since the changes took effect in September, handed Korhonen the reins of Global at the start of 2007 and is due to announce who is taking over the remaining fund later this year. The objective of Global Special Situations, which is in the IMA Global Growth sector, is to achieve long-term capital growth by investing in international companies with unrecognised value characteristics. Investors looking for capital growth and those wanting to add global equity exposure to a UK-biased portfolio are its target audience, as well as those who like the prospect of higher long-term returns than cash or fixed income. "Investors need to have time horizons of at least three years because it is a more volatile product," says Korhonen. "If you don't have this then please take your money away as this won't be a fund for you." Those that do, he adds, stand to benefit a great deal from taking a global approach to investing. "The main benefit is expanding the universe of companies," explains Korhonen. "The majority of businesses operate on a global basis - or at least have international competitors - so why limit yourself to one specific country?" Drugs giant GlaxoSmithKline (GSK), for example, is listed in London, but has a French chief executive and derives most of its profits from the United States. Valuation anomalies Looking for valuation anomalies is the first step Korhonen makes in constructing his portfolio, which currently has around 100 stocks. These can include new business strategies or an impending merger that the market isn't taking into account. Many of the biggest holdings in the fund are major names which, Korhonen believes, are being overlooked by the market. "Tesco (TSCO) is a great retailer; it's stable and has good growth prospects, yet it's not properly valued," he points out. Stocks will usually be sold when the target price has been reached - and, therefore, the mis-valuation has disappeared - or if there is an unforeseen change in a company's underlying fundamentals. Korhonen describes himself as being "cautiously optimistic" about the current economic outlook, although he concedes that the downside risk is much higher than the potential upside returns. As a result, the portfolio is rather defensively positioned. If the present benign environment continues this will probably result in average stockmarket returns for the year around the 10% mark, he says, and that would be perfectly reasonable, but even the prospect of a rally doesn't concern him. As far as the longer term is concerned, he hopes to be delivering a top quartile performance to investors by the time he has clocked up three years at the helm and admits he'll be bitterly disappointed if he misses this target. Even if he does deliver the goods on a medium to long-term basis, however, Korhonen remains unconvinced that he'll ever be able to escape from the shadow of Anthony Bolton. "In five years' time there will probably still be someone comparing me to Anthony," he says with a grin. "The majority of people have started to look more at what I'm doing as an individual, but I don't think I will ever get away from it completely."
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