Fidelity Asian Values: successful Asian small cap specialist

Long-term investors who don’t mind a little extra risk might be able to improve their portfolio’s performance by including a modest allocation to areas that others often overlook. A good example are the small cap stocks in Asia, which are about as far off the beaten track as it is possible to go.

When considering this type of asset class, it makes sense to pick a fund with a proven history of beating its benchmark. One such is Fidelity Asian Values, an investment trust that has recently announced another year of outperformance to add to its strong long-term track record.

Objective and approach

Fidelity Asian Values aims to achieve capital growth by mainly investing in the stock markets in Asia ex Japan. Longstanding manager Nitin Bajaj typically has a two-to-three-year investment horizon, with the performance measured against a small cap benchmark spanning the region.¹

Bajaj looks for smaller Asian companies with best-in-class management teams and dominant positions, which have been mispriced by the market.² He mainly seeks to outperform via his bottom-up stock selection decisions, with the small caps offering a fertile hunting ground as they tend to be under researched.³

The fund has a benchmark agnostic, value-oriented strategy that means the returns are likely to be significantly different to the index. It is an approach that should benefit from the fact that small cap value stocks in the region are available at a significant discount to their growth stock peers, with the portfolio trading on a PE ratio of 10.4 times earnings versus 17 times for the benchmark.⁴

The underlying portfolio

It is a relatively diversified portfolio with the top 50 positions at the end of September accounting for 71.3% of the assets. Another notable feature is the 17.6% investment in large cap stocks worth more than £10 billion that are excluded from the index, along with the significantly higher allocation to the micro caps valued at less than £1bn.⁵

There are also some important active country allocations, with China and Indonesia being meaningfully overweight, while more expensive markets like India and Taiwan are materially underweight. The most favoured sectors are: Financials, Consumer Staples and Energy.⁶

Performance

Fidelity Asian Values has built up a strong long-term track record, with annualised share price growth of 7.4% per annum since the performance commencement date of 13 June 1996, compared to 6% from the benchmark.⁷ The fund has continued this trend under Bajaj’s ten year tenure, reflecting his strong stock-selection skills.⁸ Past performance is not a reliable indicator of future returns.

Another contributory factor is the use of contracts-for-difference, a type of derivative that can be used to profit from price movements in either direction. It is these instruments that provide the gearing, which can magnify the potential returns when applied successfully.⁹

What are the manager’s latest views?

Writing in the recent accounts, Bajaj said that they own a basket of good quality businesses, as evidenced by their return on equity, and they own them at a significant discount to market valuations.¹⁰

“We continue to focus on investing in good businesses, led by competent and honest management teams, available at a valuation that offers a suitable margin of safety. This time-tested approach has delivered sustainable performance for the Company over the long-term, and we are confident that it will continue to do so well into the future.”¹¹

Dividends, discount and costs

The Board has proposed a significantly higher dividend of 20.5 pence for the year ended 31 July 2025, which gives the shares a prospective yield of 3.4%. This was achieved by re-allocating three-quarters of the management fee and finance costs from the revenue reserves to the capital reserves.¹²

A more proactive approach to share buybacks has also been introduced, contributing to a narrowing of the discount to around six percent.¹³ With an ongoing charges figure of 0.95%, costs remain competitive for an actively managed fund in this specialist area.

What do the brokers say?

The broker Numis says that Fidelity Asian Values offers an interesting way to access Asian small caps, an area which is under-researched, creating overlooked opportunities to generate alpha.¹⁴

“[It] benefits from the experience of Nitin Bajaj, who runs the portfolio through an index agnostic, value-oriented contrarian strategy, with a focus on good companies that have fallen out of favour with the market…. Nitin has built an excellent track record over multiple time periods and importantly, in a variety of market conditions, which we believe serves to highlight the manager’s strong stock-picking skills.”¹⁵

Past performance is not a reliable indicator of future returns.
^{Source: Morningstar as at 31.10.2025, bid-bid, net income reinvested.
©2025 Morningstar Inc. All rights reserved. The MSCI AC Asia ex Japan Small Cap (N) Index is a comparative index of the investment trust.}

Source:

^{1, 3, 5, 6, 7} Fidelity Asian Values, factsheet 30.9.25

^{2, 4, 8, 9, 12, 13, 14, 15} Numis report dated 17.10.25

^{10, 11} Fidelity Asian Values, accounts for the year ended 31.7.25