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Life after Shah: AAA-rated Wright adds Brewins to Fidelity Special Values

Life after Shah: AAA-rated Wright adds Brewins to Fidelity Special Values

AAA-ratedAlex Wright has taken a 1.5% position in Brewin Dolphin, backing the private client stockbroker because of its management's drive for change.

Wright, who took on the £347 million Fidelity Special Values trust from Sanjeev Shah in July, said he backs Brewins because of its 'sticky' client base and believes there are better opportunities for returns compared to its rivals.

Increasing its margins is key to realising this potential, Wright said.

'Brewins has realised [this],' he explained, pointing out that while Rathbones has fewer assets under management its margins are healthier.

'The Brewin Dolphin business is pretty good. Rathbones is on a higher P/E and that does not make sense to me,' Wright (pictured) added.

Wright already holds Brewins in his open-end fund, which over the last three years has returned 78.5% versus a 38.6% rise in the Numis Smaller Companies Extended index, and 43.2% by the Numis Smaller Companies (ex investment trusts) Total Return index.

He initiated the position in Fidelity Special Values as part of his strategy of tilting the portfolio towards mid and small caps.

Largely, the sectors the vehicle is exposed to have stayed broadly the same since Wright took over from Shah, but he told Wealth Manager he is now underweight banks and neutral on financials more generally.

No sale on SJP

Wright, who is ranked in position 29 in Citywire 1000, our guide to the world's top fund managers, said he had also looked at Lloyds-owned St James's Place, but has not taken a position in the wealth adviser network because he believes its fees may come under pressure.

He also believes it unlikely Lloyds will be able to let go of its 60% stake, despite it obviously being up for grabs for some time.

This view is in stark contrast with Axa Framlington's Nigel Thomas, who has been closely monitoring the prospects for a bid after Lloyds' holding was valued at around £1 billion.

Thomas told Wealth Manager earlier this month that he would add to his SJP position in the event of a deal, and currently holds 7.5 million shares in St James's Place, accounting for 0.89% of his Citywire Selection UK Select Opportunities fund.

Performance

After roughly two months at the helm, it is too early to judge the impact of Wright's arrival on Fidelity Special Values, however the manager said he and the board would be looking for its 11% discount to narrow and the trust's assets to grow going forward.

Wright said he would also look to take advantage of gearing, a key benefit of the closed-end structure.

If timed well, gearing can add to an investment trust's returns, which before the hand over from Shah to Wright stood at 36.8%, looking at the three years to the end of April, versus 51.6% by its comparator index.

Gearing on Fidelity Special Values is currently 105%.

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Nigel Thomas
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74/155 in Equity - UK (All Companies) (Performance over 3 years) Average Total Return: 37.69%
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