All about Fidelity India Special Situations Fund

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

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.

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.

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.