Fidelity China Special Situations focuses purely on China – a market that manager Dale Nicholls believes is too big to ignore. He thinks that one day the sector will be Asia ex China rather than Asia ex Japan, because the long-term possibilities for China are so great.

Nicholls has managed the trust since 2014, presiding over a considerable improvement in its performance. This is partly due to an improvement in investor sentiment towards China and partly his focus on ‘new’ China – investing in areas of the market related to the country’s modernisation. He likes small and medium-sized companies, where he believes lower levels of research leads to more mis-pricing opportunities.

Since 2016, Nicholls has been able to invest 10% in unlisted companies, up from 5%, amid a trend for Chinese companies to list on a public stock exchange after their development has progressed.

The ability to gear (borrow), and the manager’s ability to take short positions in single companies and indices, also serve to increase its risk profile, so it is best suited to more adventurous investors willing to take a patient approach.

October 2020