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Home > Business > Special


All about Fidelity India Special Situations Fund

April 01, 2006

Summary
  • Type
  • Open-ended equity (diversified)
  • Benchmark
  • BSE 200
  • Min. Investment
  • Rs 5,000
  • FaceValue
  • Rs 10
  • Entry Load
  • 2.25% (max.)*
  • Exit Load
  • 1.00% (max.)**
  • Issue Opens
  • March 28, 2006
  • Issue Closes
  • April 26, 2006
    *For investments less than Rs 5 crores; nil for investments of Rs 5 crores and more
    **For redemptions made within 6 months from the date of allotment.

    Investment Objective*

    To generate long-term capital growth from a diversified portfolio of predominantly equity and equity-related securities including equity derivatives.
    *Source: Offer document

    Is this fund for you?

    Fidelity India Special Situations Fund (FISSF) is the latest offering from Fidelity Mutual Fund.The fund house defines special situations as out of the ordinary/unusual situations in which companies find themselves; these situations, in turn, offer fund managers with attractive investment opportunities. Investors would do well to understand that a special situations fund is distinct from a contra fund or a value-style fund. In fact the latter would qualify as subsets of a special situations fund.

    For example, many value stocks could be the result of special situations; but some growth stocks may also qualify as special situations investment opportunities. Similarly, though every contrarian stock pick might be a potentially special situation, not every special situation is necessarily a contrarian pick. Hence FISSF offers investors a basket of many investment styles within the same fund.

    Fidelity has a history of managing special situation funds in countries like UK (the fund has been in existence for over 25 years and has outperformed its benchmark index nearly 6 times over) and USA among others; these experiences can hold the fund house in good stead while managing FISSF. Also, the fund house's expertise in the area of research will aid FISSF's prospects

    The fund house's indicated portfolio management style (concentrated holdings and free flowing investment style) suggests that FISSF will be an aggressively managed offering within the diversified equity funds segment. Hence the fund will typically be suited for investors with a flair for high risk investment avenues. Furthermore, it is imperative that investors form a core portfolio consisting of well-managed, conventional diversified equity funds like HDFC Top 200, Sundaram Growth and Fidelity Equity Fund among others before investing in FISSF.

    The fund should find a place in investors' portfolios from a diversification perspective, in terms of its fund management style.

    Portfolio Strategy

    FISSF is mandated to invest between 80%-100% of its assets in equity and equity-related securities; also upto 20% of its assets can be invested in money market instruments. The indicated levels of investment for equity and debt holdings are 95% and 5% respectively.

    InstrumentsAllocation Range
    Equity and equity related securities80%-100%
    Money market instruments0%-20%

    The fund will follow the bottom-up stock picking style. Also the fund will have a free-flowing investment style i.e. it will invest in stocks across market capitalisations and sectors. FISSF is likely to hold between 40-60 stocks in its portfolio with the top 10 stocks accounting for 35%-50% of its corpus. The allocation for each stock can be in the range of 6%-8%. We believe the fund's portfolio could be a potentially concentrated one and may expose investors to higher levels of volatility.

    Fund Manager Profile

    Mr. Rajesh Singh, Fund Manager is a Mechanical Engineer. He also holds a degree in management and a CFA charter. He joined Fidelity as an investment analyst in Hong Kong in May 2000. In 2002, he moved to Boston where he was responsible for managing Fidelity's Global Financials Fund.

    Prior to joining Fidelity, Mr. Singh was associated with CLSA securities and Tata Steel among others.

    Outlook

    At a time when most fund houses are augmenting their assets under management by launching new fund offers (NFOs), which add little value to investors' portfolios, FISSF offers a truly unique investment opportunity. FISSF will make an apt fit in the risk-taking investor's portfolio. Powered by its investment style and lineage, we believe FISSF looks equipped to deliver above-average returns over the long-term investment horizon (3-5 years). However the fund's concentrated holdings and free flowing investment style can make it a candidate for volatility.

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