Off the beaten track


GOODBYE Mr Bolton, hello Mr Nobody. Investors in Fidelity's Special Situations fund are being asked to entrust half their money to an unknown Scandinavian with a limited track record.

Few outside of Fidelity itself had even heard of Jorma Korhonen before Monday evening, when he was unveiled to a throng of eager journalists and IFAs.

What we do know about the man entrusted to run the new Global Special Situations Fund is that he is a Finn. So he will join that select band of 'famous Finns' who include Lasse Viren, the double 10,000-metre Olympic champion who allegedly had blood transfusions before major runs to boost his oxygen levels. We hope Mr Korhonen proves as adept as the Flying Finn at going the distance.

His limited record includes having run a couple of global funds for investors in Japan and Australia, one of them for 18 months and one for a year.

These have performed quite well, but in a rising market. Unlike Anthony Bolton, who has run Special Situations for 26 years, Mr Korhonen has yet to prove himself in a falling market.

On the plus side, he spent 149 days last year touring the world looking at likely investments (nice work if you can get it).

Fidelity argues Mr Bolton was unknown when he started out - but then he wasn't about to take the reins of a £3bn investment fund. So when Fidelity Special Situations splits in September, what should investors do?

Well, we can take heart from the fact that Mr Bolton will run his UK Special Situations fund until the end of next year and the new Global Special Situations fund until the end of this year.

He will then keep an eye on Mr Korhonen's fund until the end of 2007, when he will also hand over the UK Special Situations fund to an as-yet-unnamed manager. According to Fidelity's UK mutual business managing director, Richard Wastcoat: 'Anthony wanted a successor he knew well. He has worked very closely with Jorma for a long time.'

That's as may be, but investors and their advisers need to have confidence their money will be well managed. Apparently one group of advisers greeted the announcement with stunned silence.

Even the most sophisticated investors might have trouble distinguishing between the funds initially - the UK fund will be able to hold global stocks while the global fund will be able to hold UK stocks.

As an investor in these funds, I will be taking a wait-and-see approach. Certainly I will stick with Mr Bolton as long as he is running the show because he has delivered superb returns down the years.

But from next January, I will be watching the progress of the new fund carefully, and if I'm not convinced by the performance, I will be off - faster than a Flying Finn.

Standard Life

• SHOULD Standard Life's 5m customers take the opportunity to buy shares at a 5% discount this summer? The answer is by no means clearcut, so let's take a closer look.

Once you've jumped the first hurdle of whether you want to be buying shares at all, the next question is whether you want to buy shares in the insurance sector.

Then we come to Standard Life itself. The 5% discount and an extra free share for every 20 held for a year, may sound attractive.

But bear in mind that the market has fallen by around 10% since April, so you could argue that Prudential and Aviva shares are also available at a discount compared with their spring value.

I'm often sceptical about the negative comments that come from many analysts before privatisations. They are being paid by big City institutions who want to buy the shares as cheaply as possible.

It's therefore hardly in their interests to have millions of small shareholders muddying the waters.

But before investing, consider whether you really want to hold shares in a single company - many investment funds will give you exposure to Standard Life or other insurers with less risk.

Self-sacrificing mums and dads

• A SURPRISING number of parents seem to be worried that their children won't be able to afford to buy a property when they grow up. It's a conversation I've overheard or been party to on numerous occasions recently.

So these self-sacrificing parents are adding to the burden of their own mortgages by taking on yet more debt to buy a home for their children.

At one level this makes a reasonable amount of sense. If you have some spare money and want to invest it for your children over 20 years, then bricks and mortar isn't a bad option.

At the end of the day you can hand them something useful and, even if they don't want to live in that convenient flat around the corner from you, they can sell it and buy something else. Sensible children, however, will realise that as grandparents you will eventually make cheap babysitters.

But you should be aware of the other potential pitfalls, the greatest of which is tax. When you pass the home to your children, you will be clobbered for capital gains tax. If you die within seven years of making the gift, there will be inheritance tax to pay.

When you let the property in the intervening period, there is income tax to pay. And when you give it to your children, there could even be stamp duty to pay if there is an outstanding mortgage.

Yet despite all this, it could be a reasonable investment - if not in financial terms, then at least because it might prevent them bouncing back to their old bedrooms after university.

Off the beaten track

Search within