Fidelity’s Asia fund has won the award for Global Emerging Markets Equity fund at Money Management’s Fund Manager of the Year awards in Sydney on 22 June.
Speaking to Money Management, Lawrence Hanson, Managing Director, Australia, said the success of the $1.2 billion Fidelity Asia Fund, managed by Anthony Srom, is driven by its high conviction and disciplined investing approach, as well as by Fidelity’s history in Asia.
In a very volatile market, with fluctuating market sentiment, the fund has returned 4.07 per cent over the past 12 months to 31 May 2023 compared to 1.89 per cent for the MSCI Asia Ex Japan index.
Over the long-term the fund has also demonstrated a strong track record of above-benchmark performance, and since its inception in September 2005, has returned 9.85 per cent net per annum to investors versus the MSCI Asia Ex Japan Index of 6.87 per cent per annum.
“The award is testament to the fund’s disciplined and focused investment approach which has delivered strong investment returns to our clients.
“Fidelity has been investing in Asia Pacific for over 50 years, so we have a deep understanding of this market, and excellent corporate access.”
The firm said it takes a high conviction approach to stock selection with a ‘one in, one out’ approach and currently, it only holds 21 stocks.
A major story for emerging markets has been Asia’s handling of the COVID-19 pandemic and China’s re-opening in the second half of 2022 from an extended lockdown.
“In the second half of 2022, the fund was well-positioned for China’s reopening, and consumer-orientated stocks like Trip.com and Yum China have been strong contributors to returns. However, these positions were trimmed or exited throughout 2023 with concerns the market was too optimistic on consumer sentiment bouncing back strongly.”
Another factor that has helped performance is what the firm has avoided investing in with Chinese internet stocks being excluded as Srom is concerned about regulatory oversight of these companies.
“Relative performance is also impacted by what you don’t own, and not holding Chinese internet stocks has helped relative returns over the last year. We’ve stayed away from these stocks as we’ve seen an increase in regulation oversight and a more restricted use of customer data.
“Competition for user acquisition and retention has increased, and firms will need to spend more to grow market share, which will ultimately erode their margins.”
Looking at its recent positioning, it has been adding to semi-conductors and stocks such as Samsung Electronics and SK Hynix which de-rated last year. Taiwan Semiconductor is the fund’s top holding at 10.3 per cent, SK Hynix is 6.3 per cent and Samsung is 4.6 per cent.
“We continue to believe that the long-term demand for semi-conductors is solid, driven by continued demand for tech products like high-end computing, AI and electric vehicles. Asian firms are at the leading edge of the semiconductor industry.
“There are around 4,000 listed companies in China and there are a number of good companies to own.”
It is also exploring opportunities beyond China in India which was, at the end of May, an underweight position at 10.8 per cent compared to a benchmark weighting of 16.3 per cent. The country was “coming into focus” as valuation multiples have de-rated, the firm said.
As for Fidelity’s future plans in Australia, the firm said it plans to bring more of its offshore products to Australia. This will be based on client demand and where Fidelity feels it can meet those investor needs.
“Fidelity Australia is this year proudly celebrating 20 years since the inception of the Fidelity Australian Equities Fund. Building on our highly successful Australian equities franchise, we will continue to bring the best of Fidelity’s globally manufactured investment capabilities to Australia, to launch new and innovative products where we have proven experience.
“Having already made two of our global funds available on the ASX – the Fidelity Global Demographics Fund (Managed Fund) and the Fidelity Global Emerging Markets Managed Fund, we plan to make more strategies available on exchange, to help make investing with Fidelity as frictionless as possible.”
This is the third category win for Fidelity, having won the category with its Global Emerging Markets fund at the awards in 2021 and 2020.
