Why these three handpicked UK funds stand out from the rest

There are literally hundreds of actively managed UK equity funds for investors to choose from, but only three have made it onto Fidelity’s Select 50. Each of these handpicked funds can be used on a standalone basis to provide exposure to the domestic market, but they are also sufficiently different that they would complement one another.

First up is Martin Currie UK Equity Income, which holds a concentrated portfolio of large-cap UK stocks. Its managers, Ben Russon, Joanne Rands and Will Bradwell, look for companies that generate sustainable cash flows and pay regular dividends, while not being overly reliant on debt.

The fund has a ‘quality’ investment style, with a focus on income generation and has large positions in household names like BP, Shell, Unilever and AstraZeneca. It benefits from a well-resourced, collegiate team and has an historic yield of 4.59%, - please note this is not guaranteed - as well as competitive ongoing charges of just 0.52%.¹

Martin Currie UK Equity Income top 10 holdings

1. Shell
2. BP
3. Unilever
4. AstraZeneca
5. Rio Tinto
6. British American Tobacco
7. GSK
8. RELX
9. National Grid
10. BAE Systems

Source: Fidelity International, as at 31 October 2023

The second option is Fidelity Special Situations that is run by Alex Wright, a seasoned UK investor who has been at Fidelity for over 20 years. This level of experience is invaluable, especially when following a contrarian approach that might otherwise be difficult to maintain through challenging market conditions.

As the name suggests, Wright looks for ‘special situations’ companies that might offer an opportunity to invest at an attractive valuation. These could be businesses operating in areas that are out-of-favour, or where issues have occurred that have weighed on the share price.

In recent years the macro-economic backdrop has created a challenging environment for this type of fund. The UK equity market has had a difficult time in general and the small/mid cap end of the spectrum – to which Wright is more exposed than the other two funds – has significantly underperformed its larger peers.

Fidelity Special Situations top 10 holdings

1. Imperial Brands
2. DCC PLC
3. Roche
4. CFD on AIB Group PLC
5. Aviva
6. MITIE Group
7. Babcock
8. OMV AG
9. GSK
10. Serco Group

Source: Fidelity International, as at 31 October 2023

The other name on the list is Liontrust UK Growth, which is managed by a long-standing and experienced team who run a number of UK equity strategies under the company’s flagship ‘Economic Advantage’ approach. This has a ‘quality’ investment style that seeks to identify stocks that possess intangible assets, or other durable competitive advantages.

Liontrust UK Growth mainly concentrates on larger companies, so there could be an element of overlap with the Martin Currie portfolio, despite the latter’s focus on income. This can be seen from its list of biggest positions that includes: Shell, AstraZeneca, BP, Unilever, GSK and Diageo.

Fidelity Special Situations is the most differentiated of the funds, with a contrarian value approach and a much higher exposure to medium and smaller companies than the others. However, all three are sufficiently different to gain exposure to the opportunities in the UK stock market.

Liontrust UK Growth top 10 holdings

1. Shell
2. AstraZeneca
3. BP
4. Unilever
5. GSK
6. Diageo
7. BAE Systems
8. RELX
9. British American Tobacco
10. Compass Group

Source: Fidelity International, as at 31 October 2023

¹ Fidelity International, 17 November 2023

More on Martin Currie UK Equity Income

More on Fidelity Special Situations

More on Liontrust UK Growth

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Important information - investors should note that the views expressed may no longer be current and may have already been acted upon. Select 50 is not a personal recommendation to buy or sell a fund. Reference to specific securities should not be construed as a recommendation to buy or sell these securities and is included for the purposes of illustration only. The Martin Currie UK Equity Income Fund invests in a relatively small number of companies and so may carry more risk than funds that are more diversified. Fidelity Special Situations Fund and Liontrust UK Growth may use financial derivative instruments for investment purposes, which may expose the funds to a higher degree of risk and can cause investments to experience larger than average price fluctuations. This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to one of Fidelity’s advisers or an authorised financial adviser of your choice.