Navigating a ‘tricky period’

fidelity Alex Duffy Fund Manager of the Year fmoty2021 emerging markets

28 May 2021
| By Laura Dew |
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Fidelity Global Emerging Markets has held onto the crown for the second year in the row in this year’s Money Management Fund Manager of the Year award.
Winning the Global Emerging Markets Equities category, the fund aimed to achieve returns over the MSCI Emerging Markets index.

Despite the ongoing volatility, manager Alex Duffy, who was stepping down from the fund at the end of May after seven years as manager, said emerging markets (EM) had outperformed although it had been a “tricky period” for him to navigate.

“Valuations have remained supportive with emerging markets trading at historical lows compared with developed markets. More broadly the composition of the EM universe has improved markedly over the last few decades, with many of the largest companies favourably positioned for the long-term and to withstand periods of disruption such as the pandemic,” he said.

“The pandemic resulted in a genuine ‘at home’ culture, whether it be in the form of working, schooling, shopping or even the burgeoning area of telehealth. Companies which could capitalise on that trend, especially those with established technology sectors, were strong contributors to performance.”

The tricky period allowed the fund to upgrade into quality names at a discounted price during periods of indiscriminate selling. It particularly looked for high-quality businesses which had well-capitalised balance sheets and sound corporate governance structures which would enable the companies to weather challenging environments.

This went beyond well-known Chinese technology names such as Baidu and Tencent and encompassed areas such as autos, sportswear, cookware which could perform well even in periods of low international trade.

But, Duffy said, 2021 was looking like a “mixed bag” for the region as there were near-term risks at play regarding vaccine delays and the subsequent economic impact and the fact that emerging market valuations were no longer as compelling as previously. 

“In the long-term the case for EM remains intact and will continue to offer many opportunities, supported by structural growth drivers such as urbanisation and lifestyle changes.

The rising purchasing power of EM consumers indicates opportunities also in many consumer-related businesses across a range of segments.”

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