Fidelity Special Values posts 140% five-year gain as managers see further double-digit returns

Fidelity Special Values, a FTSE 250-listed investment trust, delivered a 140% share price return over the five years to the end of August 2025 and its management says further double-digit annual returns are attainable over the next two years.

Managers Alex Wright and Jonathan Winton, who oversee a roughly 90-stock portfolio within the £1.2 billion trust, told investors the recent performance has been driven by stock selection among undervalued British companies and a broader renaissance in the UK equity market. Wright said the trust’s shares did suffer a substantial fall in 2020 amid the Covid-19 lockdown, which set a low base for subsequent five-year returns, but added that the trust has nonetheless outperformed major benchmarks over the period.

The trust’s five-year gains surpassed the FTSE All-Share Index, which rose 78% over the same span, and were even ahead of the Nasdaq Composite’s 88% advance, the managers noted. Wright said the portfolio now shows “good earnings growth” — he cites forecast average profits growth of about 10% for 2026 and 2027 — and anticipates dividends of roughly 3% on top of that, implying a potential total return in the region of 13% annually for the next two years.

In addition to expected earnings and dividend growth, Wright highlighted the possibility of a valuation rerating. He said holdings in the trust typically trade at lower multiples than the broader UK market, and that a change in market sentiment or a general rerating of UK equities could provide an extra performance boost.

The trust’s remit covers the full UK market, with a substantial portion invested in FTSE 100 names such as Aviva, British American Tobacco and Imperial Brands. However, Wright said attractive undervalued opportunities have increasingly been found outside the main index, notably among mid-cap stocks. One recent purchase was Derwent London, a FTSE 250 property company focused on prime City and West End offices; Wright described Derwent’s portfolio as high-grade and said rental incomes are beginning to rise, while the stock offers a dividend yield just under 5%.

Wright also pointed to the potential for corporate activity to lift returns. Several of the trust’s holdings, he said, remain candidates for interest from overseas buyers or private equity. Financial services group Just, a top-ten holding in the trust, was recently acquired by Brookfield Wealth Solutions, reflecting that sort of takeover interest.

The trust’s identification details and costs were restated for investors. Fidelity Special Values trades under the ticker FSV and uses the identification code BWXC7Y9. Total annual charges are 0.7%, the current dividend yield is about 2.5%, and dividends paid in the financial year to the end of August 2024 amounted to 9.54 pence. The share price was trading around £3.80 at the time of the managers’ commentary.

Analysts and investors have noted that the UK market has been relatively inexpensive compared with other developed markets, a condition that has widened the opportunity set for value investors. The trust’s strategy—buying companies perceived as undervalued and waiting for earnings recovery or rerating—has benefited from that environment, according to Wright and Winton.

Some sectors have presented specific challenges and opportunities. Commercial property, for example, has been out of favour since 2020 amid changes in working patterns, but managers argue that selectively chosen landlords with prime assets can now present compelling income and capital-growth prospects as rental markets stabilise.

Fidelity Special Values’ recent record and the managers’ near-term projections will be watched by income and value-focused investors as the UK market continues to attract attention for its comparatively low valuations and pick-up in corporate activity. The trust combines exposure to large, well-known domestic stocks with a growing allocation to mid-cap names that managers believe remain underappreciated by the market.