Fidelity China Special Situations (FCSS) aims to achieve long-term capital growth from an actively managed portfolio of stocks mainly listed in China and Chinese companies listed abroad. It is the largest UK investment trust focused on China. Manager Dale Nicholls believes that the COVID-19 crisis has accelerated several of the trends driving Chinese growth and he sees many investment opportunities, especially among under-researched, mis-priced small-cap stocks. Nicholls’s unconstrained approach allows him to invest in high-conviction ideas, principally in higher-growth consumer-led sectors, which will benefit from China’s strong growth prospects. The trust has delivered significant outperformance against its MSCI China benchmark since inception.
China has the second-largest economy in the world and it is on a path to become the largest. For long-term investors seeking to build a diversified portfolio, China is becoming too big to ignore. The strongest driver of Chinese consumption growth in coming years will remain the rapid expansion of China’s middle class, and investors may benefit from focusing on stocks that are best placed to capitalise on this trend.
- Offers direct exposure to China’s robust, long-term growth prospects.
- Provides access to broader market opportunities due to a focus on small and mid-sized companies and a capacity to purchase unlisted stocks prior to IPOs.
- Ability to leverage and take short positions to potentially enhance returns.
- Experienced manager with a strong track record, supported by in-depth research by Fidelity’s dedicated China and Asia analysts.
In early June 2020, the board expressed its aspiration to continue to increase its annual dividend and the ability to realise this ambition is enhanced by FCSS’s revenue reserves. The board has a single-digit discount policy and has been proactive in its efforts to stabilise the discount during recent market volatility. There is scope for the discount to narrow should investor sentiment towards China, especially Chinese small-cap companies, improve.