Rotating the chicken wings as the smoke from the grill irritates your eyes, a coworker mentions she just read about an event-driven hedge fund. It seemed like a good investment, she thought, and then asked, “Fidelity special situations investment trust: what is it and how does it work?” The crackling fire dances and with tongs in hand you tell her this.
Fidelity Special Situations Investment Trust: What is it, and How does it work?
The Fidelity Special Situations Investment Trust is an investment fund managed by Fidelity International, a global investment management company that provides financial products and services to institutional and retail investors. Let’s explore the what and the how of the fidelity special situation investment trust.
What is It?
Portfolio Focus – The fund’s primary focus is investments in United Kingdom (UK) and Canadian companies undergoing event-driven corporate actions, such as but not limited to, mergers, acquisitions, restructurings, and spin-offs geared to unlock hidden shareholder value.
Investment Objective – Long-term capital appreciation is the fund’s main objective. The fund managers identify and invest in firms exhibiting significant valuation improvement potential.
Management Team – Experienced Fidelity International fund managers manage the trust. The collective managerial expertise researches and analyzes investment opportunities that fit the fund’s special situations objectives.
The fidelity special situations investment trust is a portfolio of companies that have experienced significant changes resulting from event-driven corporate actions.
How Does It Work?
Investment Strategy – The fund managers perform an in-depth analysis of the prospective company’s underlying fundamentals, and their management quality and assess the potential for event-driven-induced growth. This collaborative effort identifies firms with positive susceptibility to special situations change.
Diversification – Selecting holdings spanning diverse domestic and international sectors, and industries increases the fund’s capital appreciation potential and serves as a risk mitigation strategy.
Actively Managed – Fund managers actively manage the fund through stock selection, and market research-based buy, hold and sell decisions.
Long-Term Horizons – Aiming to capitalize on unfolding special situations, the fund is predicated on a long-term horizon strategy.
Risk Mitigation – The substantial growth potential of special situations investing is accompanied by equally substantial risk. Risk management strategies like consistent monitoring and diversification are employed to mitigate the loss of permanent capital.
Returns – Fund investors benefit from the portfolio’s capital appreciation and annual dividend distributions. The fund’s performance is measured against the FTSE All-Share Total Return Index, which is a market capitalization-weighted index measuring the performance of the 600 largest publicly traded companies on the London Stock Exchange (LSE).
Fund Fees and Expenses – The fund provides active portfolio management and administrative services that generate expenses, which are covered by ongoing management fees. As of this writing, the management fee is 1.6% of assets under management (AUM) and the transaction fee is 0.16% based on the buying and selling activity within the fund. There is no performance fee and currently, the fund has a $3.83 billion AUM.
Fidelity International’s fidelity special situations investment trust is just one of 1,400 offered funds. The investor attraction is the fund’s high return potential, experienced professional management, and mandated diversification risk management strategy. The fund is a well-managed avenue to long-term capital appreciation while getting paid (dividends) as your investment grows.
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