Based on Morningstar’s data, four Fidelity International funds are among the winners of the Best Funds Awards 2024 by The Edge Singapore. This is the highest number of winning funds among the fund houses this year.
The winning funds span four categories: Asia ex-Japan equities, global fixed income below US$1 billion ($1.36 billion) in assets under management (AUM) and global equities above and below US$1 billion in AUM.
One of Fidelity International’s key competitive advantages is the large number of investment professionals covering fundamental research, says Sabrina Gan, head of Southeast Asia and country head of Singapore at Fidelity International.
As of the end of 2023, the firm has over 500 dedicated investment and sustainable investing researchers. Its investment team’s “long-term, fundamentals-led and differentiated approach” offers outperformance.
This often means not investing with the crowd, she adds.
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Global equity funds
The Fidelity Global Technology A-Dis-EUR fund is a contrarian, valuation-led tech equity strategy, says Gan. “It tends to avoid momentum stocks and takes a holistic approach to tech investing.”
As of Feb 29, the fund provided one-year returns of 30.5% and annualised three-year returns of 13.2% before fees. With 101 holdings, the top three holdings are Microsoft Corp (5%), Taiwan Semiconductor Manufacturing Corp, TSMC (4.8%) and Apple (3.9%).
See also: PIMCO emerges as top winner with four winning funds across fixed income securities
More than half of the fund’s holdings (57.8%) are in information technology, 12.1% are in communication services and 10.4% are consumer discretionary stocks. As of Feb 29, the fund size is EUR19.83 billion ($28.7 billion).
Meanwhile, the Fidelity Global Equity Income I-Acc-USD fund tends to invest in “high-quality companies that pay attractive, growing dividends”, says Gan.
As of Feb 29, the fund provided one-year returns of 19.6% and annualised three-year returns of 32.1% before fees. With 39 holdings, the top three holdings are Progressive Corp (6.5%), Arthur J Gallagher & Co (5.2%) and Deutsche Boerse AG (4.6%). As of Feb 29, the fund size is US$233 million.
Holdings listed in the US make up 36.6% of the fund, while those in the UK make up 17.4% of the fund and those in France make up 9.9% of the fund’s holdings. Financials (32.8%), industrials (21.9%) and information technology (9.8%) are the top three sectors represented in the fund’s holdings.
Gan says the equity funds will continue to focus on an individual company’s valuations and fundamentals. “Given the narrow market breadth in global equities, the global equity funds are about finding opportunities with attractive risk-reward beyond well-held, mega-cap, momentum stocks.”
Investing in sustainability
The Fidelity Sustainable Asia Equity A-Dis-USD fund is an Asian growth equity strategy. Gan emphasises its focus on “quality companies” that benefit from structural growth tailwinds and possess “superior sustainability characteristics”.
The fund invests at least 70% of its assets in companies with “favourable ESG characteristics” and up to 30% in companies with “improving” ESG characteristics.
As of Feb 29, the fund showed 1-year returns of –5.7% and annualised three-year returns of –11% before fees. It holds 62 positions, with the top three being TSMC (9.8%), Samsung Electronics (7.4%) and ICICI Bank (6.7%). The fund size stood at US$2.83 billion as of Feb 29.
Across markets, 24.1% of the fund’s holdings are in mainland China, 18.2% are invested in India and 14.6% are in Taiwan. Across sectors, the fund’s holdings are most represented in the information technology (28.2%), financials (27.2%) and consumer discretionary (9%) sectors.
Fidelity continues to believe interest in sustainable investing will grow with increased education, adds Gan. “Recent muted returns have provided a good opportunity for bottom-up investors like us to add to stocks with good sustainability characteristics and long-term structural growth currently mispriced by the market.”
Fidelity’s ability to generate returns over the next 10 or even 20 years depends on the ability to identify long-term winners, says Gan. “That means looking for companies that are able to incorporate ESG factors into the investment process and navigate the just transition.”
Government bonds
Finally, the Fidelity Global Inflation-linked Bond A-Acc-USD fund is a global fixed income portfolio focused on developed market government inflation-linked bonds, says Gan. “It has one of the longest track records in the market and has a unique focus on bonds with one- to 10-year maturity, differentiating it from peers.”
As of Feb 29, the fund provided one-year returns of 3% over the past year and annualised three-year returns of –1.1% before fees.
The top three holdings are USTN TII with a 2.375% coupon maturing 2028 (7.91%), USTN TII with a 0.125% coupon maturing 2030 (7.87%) and France government I/L with a 0.1% coupon maturing 2028 (7.57%). As of Feb 29, the fund size is US$707 million.
US bonds make up more than half (55.58%) of the fund’s holdings. Gan says the Global Inflation-linked Bond fund “continues to be positioned for the potential for inflationary risks” to “surprise on the upside”.
2024 outlook
Gan says her team is “more positive” on the outlook for the economy and risk assets in 2Q2024. “A soft landing is our current base case with odds of a recession pushed out toward 2025. Inflation remains on a downtrend, giving major central banks room to cut rates this year, led first by Europe, followed by the US.”
She adds: “From an asset standpoint, we are relatively positive on riskier assets like equities with a preference for developed markets. We also see opportunities in investment-grade bonds amid attractive yields; these bonds can potentially benefit from a rate cut cycle.”
