reinsurance, asset backed securities or aeroplane leasing – others can provide welcome diversification to plain vanilla portfolios. And in times of market stress, a diversified approach is much needed to help boost returns and smooth losses. In this guide NN Investment Partners discuss the value of factor investing, and how the best factor strategies have a sound economic underpinning without being over-engineered. We also hear from Natixis’ UK sales head, Darren Pilbeam, who discusses how alternative strategies can provide a different lens through which to view market volatility. Alternatives do carry with them associated complexity and a lower level of regulatory oversight. So they are not without their challenges. But in a world of lower growth, a good deal of uncertainty and the feeling that traditional investment options are under delivering, alternative investments may just be the answer.
I
t’s fair to say that alternative assets are now a central strand of most investment portfolios. While some assets are too niche for the private investor – such as catastrophe
SPOTLIGHT
ASIA PACIFIC EX JAPAN
Alternatives today: providing value in the current market
Simple, intuitive and effective: avoiding the data mining trap
New adventures in alternatives
IN THIS ISSUE
A report by Investment Week
By NN Investment Partners
By Natixis Investment Managers
This document is for investment professionals only and should not be relied upon by private investors.
All investing involves risk, including the risk of capital loss. This material is provided for informational purposes only and should not be construed as investment advice. The analyses, opinions, and certain of the investment themes and processes referenced herein represent the views of Natixis Investment Managers as of March 2019. The views and opinions expressed may change based on market and other conditions. There can be no assurance that developments will transpire as forecast, and actual results may vary. Provided by Natixis Investment Managers UK Limited, authorised and regulated by the Financial Conduct Authority (register no. 190258). Registered Office: Natixis Investment Managers UK Limited, One Carter Lane, London, EC4V 5ER.
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NATIXIS INVESTMENT MANAGERS
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This is for investment professionals only and should not be relied upon by private investors.
The value of investments can go down as well as up so the client may get back less than they invest. Past performance is not a reliable indicator of future returns. The Fidelity funds featured in this publication invest in overseas markets which means their value can be affected by changes in currency exchange rates. Some funds invest in a relatively small number of companies and, therefore, may carry more risk than funds that are more diversified. The funds may also use financial derivative instruments for investment purposes, which may expose the fund to a higher degree of risk and can cause investments to experience larger than average price fluctuations. Investments in Fidelity funds should be made on the basis of the current prospectus, which is available along with the Key Investor Information Document, current annual and semi-annual reports free of charge on request by calling 0800 368 1732. Issued by Financial Administration Services Limited and FIL Pensions Management, authorised and regulated by the Financial Conduct Authority. Fidelity, Fidelity International, the Fidelity International logo and F symbols are trademarks of FIL Limited. UKM0220/26476/SSO/0620
IN PARTNERSHIP WITH
he “Asian century” is in full swing as the region resumes its age-old place at the centre of our economic world. Asia represents more than half the world’s population, most of the world’s megacities, and a rising proportion of global
T
Asia – Still growing, still changing
“Urbanisation and the rising middle class across Asia is the secular growth story that is driving Asian consumption,” says Teera Chanpongsang of the Fidelity Asia Fund.
GDP – in stark contrast to Europe’s anaemic growth and projected fall in population over the next decade.
Yet investors are not finding it easy to focus on these fundamentals, given important but shorter-term issues such as the US/China trade disputes and the human tragedy of the coronavirus outbreak in early 2020. This guide uses an infographic to remind investors of Asia’s longer-term trajectory while Fidelity’s experts explore the changing structure of the regional economy.
Teera Chanpongsang looks at change underway inside the region including rising intra-regional trade, urbanisation and a growing middle class. Anthony Srom explains his approach to high-conviction investing in a focused selection of Asian companies. Nitin Bajaj then explores a value investor’s view of Asian opportunities and Hyomi Jie reminds us of a trend that is not going away: the growth of premium local brands in tune with China’s increasingly affluent consumers.
Can investors keep pace?
NO LONGER NICHE
In 2016, 344 new alternative funds were launched, compared to 10 in 1997. And further growth is on the horizon: a 2018 report by data tracker Prequin, The Future of Alternatives, predicts that the alternative investment industry will reach AUM of $14 trillion by 2023 – up from $8.8 trillion at the end of 2017. Much of this has been driven by the quest for diversification in an evolving market environment. Equities and bonds are often characterised by an inverse relationship – meaning that when equity prices rise, bonds fall. However, this relationship can sometimes reverse, while factors such as regulatory changes and the impact of monetary policy have led to higher risks for both asset classes. This has the effect of increasing the appeal of alternatives, which typically have low correlation to traditional asset classes – and to different assets that fall under the ‘alternatives’ umbrella. At the same time, factors such as lower forward-looking return expectations and concerns about the prospect of a recession are contributing to interest in this sector. All of this means that alternatives have a role to play in most investment portfolios.
One of those important roles can be seen in the pensions landscape, which is constantly changing through new legislation, court decisions or alterations in practice. In a recent report by JLT Employee Benefits, they found that an allocation to professionally managed illiquid assets could increase defined contribution (DC) pensions by 10 percent. The firm suggested a 20 percent exposure to illiquid assets such as private equity, infrastructure or real estate, could enhance diversification and generate additional return. Maria Nazarova-Doyle, head of DC investment consulting at JLT Employee Benefits, said: “The focus on daily-dealt funds with near 100 percent liquidity is a fundamentally impatient approach to DC. Many default strategies are currently failing to adequately diversify investments, precluding savers from the valuable illiquidity premium that can be accessed through alternatives.” Commenting on the research, Gemma Siddle, chartered financial planner for Eldon Financial Planning, said: “Illiquid assets such as these need to be considered as a long-term investment and certainly not a short or medium term ‘bet’. It’s important that those investing in them understand the risks and potential benefits. However, carefully managed investment into these areas in other countries shows that such arrangements can be a success.”
BOOSTING PENSIONS
Targeted absolute return funds have enjoyed something of a surge in popularity over recent years, which should come as no surprise, since their main aim is to deliver positive performance regardless of market conditions. But this isn’t guaranteed and you may get back less than you put in. In a bid to deliver consistent positive returns, these funds can employ a number of different investing techniques, and at times complex financial instruments, to help them to profit from the markets’ ups and downs. They can invest in equities, bonds and even currencies as well as a mixture of all of these and more. One of the more common tactics they use to enable them to potentially make money even if markets are sliding is known as ‘short selling’ where the aim is to profit from falling share prices. But while demand for these funds tends to increase during periods of volatility, it’s vital to remember that there’s no guarantee that they can protect your capital – you may well lose money. Louis Tambe, a fund analyst at FE, says this is a sector that can provide useful exposures, “whatever your views on markets”, noting that with heightened volatility and larger spreads between the most expensive and cheapest stocks, “if momentum doesn’t break out either upwards or downwards then there could be more room for fundamental equity long/short managers to separate the winners from the losers.” However, he warns that there is also more risk of getting this wrong, “so manager selection is important.”
THE ABSOLUTE RETURN ADVANTAGE
Tambe says that another potentially interesting area is that of defined return investments – in other words, assets which are typically held to maturity to lock in a yield – and structured products that only pay out in extreme market movements, “but pay a good return should they trade in a range.” But if markets were to start trending downwards, and if a crisis were to be on the horizon, “then allocating to more defensive assets is wiser” – an outcome which he says could benefit equity market neutral or global macro managers, as well as absolute return fixed income managers playing on longer duration and widening credit spreads. Similar concerns have been expressed about alternatives as a whole. “The returns of alternative funds have not lived up to expectations,” comments Mattias Möttölä, Associate Director, Alternatives at Morningstar. “Many investors have bought them often to replace fixed-income investments, which yield very little, but the expected returns of alternatives have not materialised in many cases.” He notes that such funds do provide diversification benefits, and that a reasonably priced alternative fund with a strong manager and proven process can be a good fit to a portfolio – “but it’s important to understand the manager’s strategy to understand what you can realistically expect from the fund.”
It is clear that alternatives are not without their challenges, and the associated complexity and lower level of regulatory oversight is a concern for some. Consequently, it is particularly important to understand the performance of different asset classes and the implications of market developments. But despite this caution, alternatives continue to be widely used, with robust growth expected in the coming years. The Prequin report predicts that by 2023, 34,000 fund management firms will be active in this space – 21% more than in 2018. The alternative investment universe contains a huge range of investment options, from asset leasing to infrastructure projects and everything in-between. Researching and valuing some of the more esoteric sub-asset classes can be difficult. Given the wide variety of options available, which have the potential to be true diversifiers for investors? With so many unique characteristics to the different investments, it takes specialist research in order to find the best opportunities the market has to offer.
ROBUST GROWTH
Alternatives fundraising (global private capital)
Billions USD
Demand for alternatives to strengthen
% of respondents planning to allocate more or less capital
2
1
There are many definitions of alternatives but some of the main types include commodities, specialist property, infrastucture and asset leasing....
Defining alternatives
Could solar energy help multiply returns for alternatives investors?
Jared Murray on Unsplash
READ MORE
Sources: (1) Preqin (2) Preqin, HFRI, J.P. Morgan Asset Management. Fundraising categories are provided by Preqin, and represent their estimate of annual capital raised in closed-end funds. Hedge fund fundraising numbers are represented by net flows and come from HFRI.Data are as of December 31, 2018.
lternatives are often defined in terms of what they do rather than what they are. To be sure, it is an asset class that does a lot: from the
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CLOSE
There are many definitions of alternatives but some of the main types include commodities, specialist property, infrastucture and asset leasing. Once considered to only available to large institutional investors, these assets have moved to the mainstream as smaller investors look to add more diversification to their more traditional investments like bonds and equities. A 2018 paper published by CAIA Association and the CFA Institute Research Foundation, Alternative Investments: A Primer for Investment Professionals, outlines three primary attributes of alternatives, any of which can lead an asset to be classified as ‘alternative’: 1. Returns are driven by exposures to underlying assets with non-traditional cash flows. 2. The returns of the investment are driven by complex trading strategies which result in “unusual risk exposures”. 3. Returns are structured to “generate non-traditional payouts”. The report notes that in all of these cases, specialised methods of analysis are needed as returns do not mimic the returns of traditional asset classes – i.e. stocks and bonds.
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ALTERNATIVES
ver recent times, China has run into headwinds stemming from the US-China trade dispute, the level of domestic debt, concerns over a broader global economic slowdown, and the coronavirus outbreak in early 2020.
The mood had seemed to lighten at the start of 2020 as the US and China agreed a phase 1 trade deal. The agreement signed by US president Donald Trump and China’s vice premier Liu He does avert painful tariffs and while it is far from all-encompassing, it signals no major escalation for the time being. However, the rapid spread of the coronavirus in the early months of 2020 has introduced a new risk factor (see below).
O
The drumbeat of day-to-day headlines threatens to drown out the longer-term story of growth across the wider Asia region. Teera Chanpongsang, manager of the £3.0bn Fidelity Asia Fund, says there are many new opportunities related to the rising middle class and their consumption of a range of goods and services. For those with longer investment horizons, could periods in which market valuations look attractive relative to developed markets like the US represent opportunities to initiate or increase exposure to Asia?
The trade disputes and the uncertainty these engendered have been felt worldwide and were a contributing factor in global central banks shifting towards a more accommodative stance over 2019 to support economic activity. The broader role that central banks have played in driving and facilitating the decade long US-led bull market should not be overlooked, although Paras Anand, Fidelity’s Head of Asset Management in Asia Pacific, wonders if “there is a risk that the returns to those areas that have been the greatest beneficiaries have largely played out.”
The global setting
If so, he says, the Asian markets might turn out to “offer good earnings growth at lower valuations relative to many developed markets.” Fidelity’s global earnings outlook paints a relatively robust picture of Asia earnings compared to other major equity market regions. Anand cautions investors to take care, however, as not all sectors in the region will reap the same benefits from growth: “In China, in particular, there could be weaker returns from the popular technology and consumer names and stronger performance from other sectors.”
Significant structural change is underway inside the region. “Intra-Asia demand now makes a significant contribution to domestic revenue generation,” says Teera Chanpongsang. Important in itself, this may mean any further trade issues have less impact on an increasingly domestically-driven regional economy.
Regional structural shifts
There are other fundamental long-term trends, as our infographic article explains. Asia’s population continues to grow, and now makes up nearly 60% of the world’s total population compared to Europe’s share of under 10%.(1) But it’s really the changing lifestyle of this growing population that is making waves, with Asia now claiming 26 of the world’s 40 megacities (over 10m people)(2) and contributing an ever greater share to the growing global middle class. “Urbanisation and the rising middle class across Asia is the secular growth story that is driving Asian consumption,” says Chanpongsang.
Rising consumption, in turn, is creating regional giants. Alibaba’s 2019 ‘Singles Day’ sales extravaganza broke records with $38.4bn sales(3) compared to $30.8bn last year – dwarfing similar events in the US and other developed economies. Fidelity’s experts think that one effect of the coronavirus tragedy may be to increase the penetration of online consumption still further, with online services such as e-tutoring, entertainment, and grocery delivery all receiving a forward push.
But the long-term Asia growth story has bigger, strategic implications for investors:
• First, Asia’s growth story should be driving a re-weighting of the Asia Pacific region within many investment portfolios. By 2040 Asia may drive 40% of global consumption, up from around 30% today.(4)
• Second, investors need to respond to the changing shape of the Asian economy, as new industries emerge and others increase in importance, helping to determine a new set of corporate winners and losers.
Investors can no longer simply hope to ride on the coat-tails of Asian economic growth – they need to increase their understanding of the market. Fidelity’s analysts, for example, are tracking the success of Asian firms that offer a local twist to products while charging a premium price (‘premiumisation’).
Chanpongsang has followed the dramatic rise of the region’s economy since joining Fidelity as an analyst in 1994, and says he has watched “beginners mature into market leaders”. This includes the rise of China’s largest cookware company, a winner in the market to supply camera modules for android phones, and a well-positioned airports operator. (Read the case studies here).
For Chanpongsang, geopolitical stresses are less important than this long-term picture of growth and change. “There is no going back on regional structural shifts that have already been set into motion,” he says.
As the region evolves, working out which businesses will be winners or losers takes feet on the ground. “Understanding the core of a business is a crucial and non-negotiable aspect of my investing discipline, as it helps me to find structural growth beyond cyclical swings in demand,” says Chanpongsang, who is part of Fidelity’s extensive Asia-based team.
Feet on the ground
He’s now following the emerging regional dynamics closely, looking for companies with experienced management teams that will benefit from “underlying structural growth prospects”. He maintains “a clear focus on domestic exposure to benefit from strong local demand” including “companies that benefit from the secular growth of e-consumption, a rising middle class and premiumisation.”
The short-term pressures however mean that he is also wary of investing in companies where he is not completely convinced by the management team or business model. “I also prefer companies that do not have high gearing or high debt,” he says.
The positive long-term structural trends are important but the risks need to be managed through understanding each company, emphasising the quality of the portfolio holdings, and making sure returns are sustainable, says Chanpongsang.
For investors, Asia continues to offer opportunity. But as the region evolves and its growth drivers shift, it demands local knowledge to identify the winners and avoid the losers.
Asia – Too big to ignore?
Fidelity International’s Teera Chanpongsang on how the next leg of Asia's multi-year growth story might unfold
“Chinese indebtedness remains a theme for global investors,” says Fidelity’s Paras Anand, “but it is important to contextualise the risk. While China's current account has moved from surplus to deficit, this reflects in part the changing shape of the Chinese economy from a heavy reliance on exports to a more balanced economy.” Meanwhile the risk is changing shape. “There is more debt at the household level as people have rushed to buy property,” Anand says, “but state-owned enterprises have been de-leveraging and policy measures have limited overall lending growth.”
China Debt – Time to set in context?
China’s headline growth figures have trailed off in recent years towards 6% per annum. But that seems to be partly because the Chinese economy is maturing: tilting away from dependence on manufactured exports and towards a more domestic consumption-led growth model, in which services play a larger part. Fast export-led growth may be turning into more sustainable regionally driven growth, at rates that still look attractive compared to developed economies.
China growth rates: A maturing economy?
The economic impact in China is expected to be significant in Q1 2020 as panic drives both investor and consumer behaviour. Given my experience with watching the impact of SARS unfold in the early 2000s, we saw that the market bottom coincided with the peak of the crisis.
The Fidelity Asia Fund has a clear orientation towards consumption and this near-term weakness will be felt in the short-term returns. However, it is less likely to disrupt the long-term structural change that is unfolding in China and in Asia. The Chinese stock market and Chinese economy are significantly deeper and wider than they were at the time of the SARS outbreak.
While China remains a key area of the portfolio, the underlying emphasis is still on capturing the long-term market penetration opportunity in Asia as demographics remain favourable and governments maintain a pro-reform approach.
The coronavirus: A longer-term perspective
Insight from Teera Chanpongsang
•
Asia’s population continues to grow, making up nearly 60% of the world’s total population
Sources. (1) UN World Population Wallchart 2019 (2) GlobalData, February 2019 (3) Sherisse Pham, CNN Business, 12 November 2019 (4) McKinsey & Company, The Future of Asia, September 2019
Forward PE: Asia ex Japan Relative to Developed markets (Historical Example)
Source: Refinitiv DataStream, 31 December 2019
Ratios below 1.0 make Asia ex Japan appear relatively ‘cheaper’ than Developed Markets
Source: Fidelity International, as at November 2019. Please note that the earnings growth forecasts for Global and the US in 2019 are 0%.
Fidelity international earnings growth forecasts
Asia earnings outlook appears strong relative to many developed markets
sian markets appear to be in a contradictory state and I would characterise 2019 as having been a good year for regional
stock markets but a bad year for regional stocks. As we have seen in the US, market leadership has becomevery narrow with a relatively small number of large-cap growth-orientated stocks driving a large proportion of overall gains from the broader market.
Investments in Fidelity funds should be made on the basis of the current prospectus, which is available along with the Key Investor Information Document, current annual and semi-annual reports free of charge on request by calling 0800 368 1732. Issued by Financial Administration Services Limited and FIL Pensions Management, authorised and regulated by the Financial Conduct Authority. Fidelity, Fidelity International, the Fidelity International logo and F symbols are trademarks of FIL Limited. UKM0220/26476/SSO/0620
Important information
Past performance is not a reliable indicator of future returns. Note the views expressed may no longer be current and may have already been acted upon. Reference to specific securities should not be interpreted as a recommendation to buy or sell these securities but is included for the purposes of illustration only. The Fidelity Asia Fund can use financial derivatives which may expose it to a higher degree of risk and can cause investments to experience larger than average price fluctuations. Investments in small and emerging markets can be more volatile than other more developed markets. Investments in overseas markets may be subject to currency fluctuations.
*Source: https://bloom.bg/2DydHka
Absolute Return
…when you have the ability to adapt, regardless of the market environment
Benefits from perceived incorrect valuations; hence we go long undervalued assets and short overvalued assets.
Benefits from the tendency of instruments with higher yields to outperform those with lower yields; hence we go long the instruments with a high yield and short those with a low yield.
Performance tends to persist; hence we go long the winners and short the losers.
Markets are subject to predictable and excessive buying and selling pressures in the short term; hence we go long excessive supply and short excessive demand.
Implied volatilities are generally higher than realised volatilities because implied volatility is a compensation, not an expectation, of volatility. We pay realised volatility and receive implied volatility.
Value
Carry
Momentum
Flow
Volatility
Factors applied with NN IP
Cumulative performance since inception (I Cap USD), Net of fees (2)
Past performance is not a reliable indicator of future results. Currency movements can affect your investment returns. For more detailed information about the NN (L) Multi Asset Factor Opportunities fund, please refer to the prospectus and Key Investor Information Document available at www.nnip.com.
Introducing NN (L) Multi Asset Factor Opportunities
Source: (2) NN IP Performance Measurement. Data as of end March 2019. Fund was launched on 23 March 2016.
SECTOR REVIEW
The best factor investing strategies have a sound economic underpinning without being over-engineered. In this interview lead portfolio managers from NN Investment Partners’ Factor Investing team Willem van Dommelen and Stan Verhoeven discuss the benefits of a multi factor investment approach and the importance of “cutting out all the noise”
stress, such as in February 2018, when both asset classes declined sharply in unison. Meanwhile, the second half of 2018 saw a shift from synchronized global growth to an unsynchronized slowdown across regions. The fourth quarter of 2018, in particular, saw global equities fall by almost 13% – the Nasdaq was technically in bear market territory on 24 December, down 23% from its end-August peak. December was the worst month for US equities in 50 years. With interest rates rising, central banks reducing their stimulus and market volatility increasing, 2019 is shaping up to be a complex and challenging investment landscape. Traditional asset classes like equities and bonds certainly still have their place in portfolios, but there’s an increasing need to think outside the box and look at the alternatives.
Willem: Well, investors have broadly embraced the concept of factor investing and the value it brings. In the last few years in particular, we have seen an increasing demand for factor-based strategies that go beyond single stock equities and extend into other asset classes, and that target an absolute return. This is a logical and valuable step because the drivers of factor returns, like behavioural biases, are present in all asset classes. By taking a multi asset class approach and combining long and short exposures, investors can further benefit from the added value that factors can bring, namely attractive and diversified returns.
We have seen factor investing assets grow signifcantly over the past decade. What do you see as the main developments within this space?
Factor investing is an investment style that selects securities based on shared characteristics, or factors, that have proven to be persistent drivers of risk and returns...
What is factor investing?
Factor investing is an investment style that selects securities based on shared characteristics, or factors, that have proven to be persistent drivers of risk and returns. The existence of factors has been extensively documented by academics and can be explained by three distinct drivers: 1. Compensation for risks that other investors want or need to transfer 2. Behavioural biases of investors causing assets to be “mispriced” 3. Compensation for providing liquidity in case of a supply and demand imbalance As these drivers are generic, factors are present across all asset classes and markets and can be employed “bottom-up” (for individual security selection) and “top-down” (for market allocation). Given their return potential and diversification benefits, factors can be considered suitable building blocks to create “all-weather” portfolios.”
We’ve seen exponential growth in the number of factors. How do you manage the risk of investing in spurious factors?
Stan: This is clearly a risk. Harvey and Zhu(1) named this phenomenon the “factor zoo” as a reflection of the significant increase in the number of factors documented in academic literature. Most of these so-called factors are the result of data-mining, and will probably be unable to deliver excess returns out of sample. Even though academic literature will continue to provide us with research insights, we believe it is vitally important for managers to research the factors themselves before deciding which ones to adopt. More importantly, as also suggested in the Harvey and Zhu study, a clear economic rationale should be driving the research to help eliminate the risk of spurious factors. At NN IP we make sure our factors are as simple as possible in order to control the risk of data-mining. Before any data analysis takes place, we extensively review the economic underpinning and the expected behaviour and performance of a factor strategy. Only if the factor behaves according to our economic rationale – and if it is robust and profitable after accounting for transaction costs and other forms of slippage – will it be included in our portfolio.
The last few years have been turbulent, with QE, Brexit and other geo-political events. How did this impact your factor strategy?
Willem: Yes, we’ve had QE in the market for over a decade but QE is not the first time the central banks stepped in. The value investing approach has been shown to be profitable for almost a century, and during that time central banks have taken many more actions than QE. When it comes to factor investing it is crucial to maintain a long-term view and not be distracted too much by shorter-term dynamics that make people believe that this time it’s different. We therefore rely on a very disciplined research and investment process, where we do not apply discretionary overlays to avoid falling into such typical pitfalls. We have been managing our NN (L) Multi Asset Factor Opportunities fund since 2016. Since then we have been confronted not only with QE, but also with the EU referendum, US elections and a sharp drop in equities in December 2018. During this period our strategy has generated strong returns, which confirms our view that a broadly diversified factor portfolio can deliver an attractive return in all market environments.
Some factors are spurious. For example, in 2017 a Bloomberg writer designed her own factor model based on back testing US companies with “cat” in their names...
The cat factor
Some factors are spurious. For example, in 2017 a Bloomberg writer designed her own factor model based on back testing US companies with “cat” in their names.* The model bought any US company whose name had “cat” in it, like “CATerpillar”, or “CommuniCATion”. What resulted was an 850,000% return six years to date. Willem van Dommelen says: “The performance was largely due to the rallying of an untradeable penny stock. So the return could not have been achieved in real life. Moreover, it lacked any form of economic underpinning and was therefore likely not to deliver excess return out of sample. What happened was this: when the article was published the index dropped again. This shows the importance of a thorough research process, and the ability to efficiently implement the factors that come out of it.
Where do you focus on in your research process? New factors?
Stan: It’s very unlikely that new factors will suddenly pop up but we do continuously research ways to create a more robust definition of a factor that adheres to our principle of simplicity. Doing things simply and cutting out the noise involves a lot of hard work and a critical mind. Next, we put significant effort in controlling transaction costs. Factors can generate a significant turnover, so there is a clear gain to be made there. Last, we extensively test how factors interact with each other to make sure they do not load on traditional investments like equities or on other factors. We also want investors to clearly see our offering as diversified building blocks for their portfolio. Therefore we focus on ensuring they offer true diversification to other building blocks such as equities and fixed income. In this way, our research is geared to make sure that we deliver what we promise: attractive, diversified returns.
Factor investing is often considered as a complex “black box”. How do you see this?
Willem: We disagree on the “black box” point. Factor investing is rule-based so all investment decisions can be disclosed and are consistent, or repeatable, through time. We provide detailed information to our clients, which include showing factor definitions, how we combine factors and how these have led to the overall positioning and performance of the fund. Our multi asset, multi factor approach is very transparent and quite the opposite of a “black box”. This is also what drives the success of factor investing. Clients understand what is under the bonnet and they subscribe to the benefits. The approach of a non-systematic / discretionary manager is certainly more “black box” than what we do. This is because one can never look into the brain of such a manager to determine what drives his or her investment decisions, let alone whether those decisions have been consistent through time. The more difficult element here is complexity, as that is a subjective matter. What is simple for one can be considered complex by others. We aim to overcome this challenge by keeping our factors as simple as possible with a clear economic underpinning.
To what extent is factor investing commoditised?
Willem: Factor investing within equities has matured but we clearly see this isn’t the case for multi asset, multi factor absolute return offerings. Within that spectrum of factor investing we have seen consistent inflow. We see this asset growth coming mostly from investors who were initially invested in hedge funds, that applied similar strategies but in a more expensive and less transparent way, and were disappointed about performances in combination with a substantial cost base. With the growing popularity of factors we do see a lot of offerings appear that use more complex approaches. We believe one should be wary of such complex and less transparent strategies as these are more subject to data-mining risk and thereby often show inferior performance out of sample.
What if a factor stops working?
Stan: The existence of factors has been extensively researched, proven by academics and applied by practitioners. Behavioural biases are one of the drivers behind the existence of factors and we know that a bias doesn’t shift easily. Because investors have different objectives, this creates structural opportunities that can be captured using a factor-based approach.
Source: (1) Harvey, C.R., Y. Liu, H. Zhu, 2015, …and the Cross-Section of Expected Returns, Review of Financial Studies:5-68
Willem: First, build a strong understanding of why factors exist and why they deliver attractive diversifying returns. Then, see how they are put into practice. Is there a disciplined research and execution process? How does one control the risk of data-mining or p-hacking? How robust, efficient and scalable is the platform used to perform the research and implement the strategies? And do not simply select based on superior back-test results. The combination of simplicity, transparency in terms of process and infrastructure, and “live” performance are the important elements to assess.
Which Asia companies might weather macro storms?
Fidelity’s Anthony Srom explains why relative caution about China at the macro level won’t stop him pursuing a high-conviction investment strategy
From an investment perspective, I try to avoid the daily newsflow and instead focus on companies that can weather any storms ahead
So why am I excited for Yum China’s future? Because sentiment is negative, valuation supportive, and fundamentals can improve as we move through 2020. Starting with Pizza Hut, Yum China is adapting to local tastes and revamping their stores, which could turnaround that franchise. With regards to KFC, they have been able to lock in future chicken prices with suppliers due to their scale and re-working their menu to lessen cost pressures. In addition, KFC has been able to hike prices as the actual RMB hikes are quite small and people are willing to pay for convenience. Much of the negative sentiment is already priced in to current valuations, where even small improvements in Pizza Hut or KFC could see the stock rerate.
Managing for risk is important and given the concentrated nature of the portfolio I spend a lot of time looking at how stocks behave relative to each other, favouring stocks with relatively low levels of correlation. It is pleasing that we have managed to deliver the performance we have over the last five years with less volatility than the broader market.*
My approach is very much stock-specific, leveraging Fidelity’s large research network to find the best ideas across the region. The fund is a high conviction portfolio that runs between 25 and 35 names at any time. This concentrated approach means each stock can meaningfully contribute to performance and it also allows me more time to focus on each holding and the key drivers of returns: fundamentals, sentiment and valuations.
You’ve been managing the Fidelity Asia Pacific Opportunities Fund since September 2014. How do you run the portfolio and where has performance come from?
Our holdings in China have been contributors to this performance and we’ve had a material position in liquor maker Kweichow Moutai since the fund was launched. Chinese Soy sauce manufacturer Foshan Haitian Flavouring & Food has also been a standout performer and we’ve also had some success with selective holdings in Australia such as Sydney Airport, Charter Hall Group and Bellamy’s Australia.
While headline news is currently focused on the coronavirus outbreak, you may have also read that African Swine Flu has had a devastating impact on pig stock in China, slashing supply and causing pork prices to rise significantly. Consumers have taken to other sources of protein; thus we have seen chicken price increases too. KFC is the key cash generator for China's largest restaurant company Yum China, who have exclusive rights to operate and sub-license the KFC, Pizza Hut and Taco Bell brands in China. And 2019's rising chicken prices have increased costs, hurting its share price. Additionally, Pizza Hut has been in the doldrums in China.
Can you provide an example of how you’re taking advantage of any recent regional trends?
Trade war rhetoric has been a major driver of sentiment over the last 12 months. We’ve had both positive and negative newsflow and there now appears to be something of a truce following the phase one trade agreement in January. From an investment perspective, I try to avoid the daily newsflow and instead focus on companies that can weather any storms ahead. I think the US/China issue is here to stay as it is part of a longer-term strategic battle between the US and China.
What are your thoughts around the US-China trade war and how has that influenced portfolio positioning?
On top of that, there’s also a fight for liquidity globally and I don’t think China is winning. You can see that in money growth, FX reserve growth, slowing economic growth and so on. Trade is just one piece of the puzzle.
Despite being relatively cautious on China at a macro level, I’m still finding interesting stockpicking opportunities in the domestic A-share market. There are companies here that have great products, a clear market opportunity and solid balance sheets. However, investors need to be aware of potential governance issues and discount that in their investment thesis.
Within your portfolio where are your highest conviction ideas?
The Indian financials sector is also interesting. Last year’s liquidity crunch caused by the non-bank financial sector defaults pretty much halted wholesale funding and increased regulation. This has affected lending in India and the financial sector has faced significant headwinds. Sentiment remains negative, but we could be passed the worst, which may see valuations ‘mean revert’ over the course of 2020.
Anthony Srom
*Past performance is not a reliable indicator of future returns. View the fund range overview section for five-year performance data. Note the views expressed may no longer be current and may have already been acted upon. Reference to specific securities should not be interpreted as a recommendation to buy or sell these securities but is included for the purposes of illustration only. The Fidelity Asia Pacific Opportunities Fund can use financial derivatives which may expose it to a higher degree of risk and can cause investments to experience larger than average price fluctuations. This fund invests in a relatively small number of companies and so may carry more risk than funds that are more diversified. Investments in overseas markets may be subject to currency fluctuations. Investments in small and emerging markets can also be more volatile than other more developed markets.
The hunt for value in Asia
Fidelity’s Nitin Bajaj explains how he tries to spot valuation anomalies in Asian small-caps amid some interesting market dynamics
The ride might be bumpy but given the quality of the businesses we own, I feel confident about the destination
As a small-cap value investor, this has been a painful period but these trends between growth and value are part and parcel of investing in the stock market. They often capture the imagination of the media and investors before fading away. It is not possible to forecast the duration or magnitude of these swings but historically they always reverse.
We try to spend more time looking at companies rather than predicting changes in the macro environment. In this regard, we remain focused on finding good businesses, run by capable management and buying them at a good price. An attractive valuation is the starting point for everything I do as it is this that determines both the base for compounding capital returns as well as providing a margin of safety.
The positive news is that market movements create opportunities for us to add or initiate exposure to smaller companies where valuations have become disconnected from fundamentals. This is highlighted to good effect by the fact that Fidelity Asian Values PLC moved from a substantial cash position in 2018 to a small amount of leverage by the end of 2019.
At an overall level, the aggregate Price Earnings ratio of companies in the portfolio stands at around 8x which is substantially lower than the market and portfolio history. This would often be associated with distressed or troubled situations. However, on aggregate, our holdings demonstrate robust balance sheets and strong earnings as well as stable returns on equity.
A number of these companies are currently out of fashion, but I remain convinced that owning good businesses, run by able management and buying them at attractive prices is a sound way to invest.
I’ve bought numerous excellent businesses at attractive prices in 2019. This should serve the portfolio well over the coming three to five years. The ride might be bumpy but given the quality of the businesses we own, I feel confident about the destination.
Nitin Bajaj
sian markets appear to be in a contradictory state and I would characterise 2019 as having been a good year for regional stock markets but a bad year for regional stocks. As we have seen in the US, market leadership has become
very narrow with a relatively small number of large-cap growth-orientated stocks driving a large proportion of overall gains from the broader market.
Stocks over macro
Valuation anomalies are my primary interest – where in my opinion the market either ignores or misunderstands the business. I will very rarely buy into good businesses when valuations are high. For me investing is as much about protecting the downside as it is about participating in the upside.
While portfolio positioning is driven by the availability of bottom-up opportunities, we currently see significant potential among some micro and monoline finance companies in India and the ASEAN region.
The opportunity in financials
These companies are capillaries of the financial system that channel funds to the unbanked population, which is crucial for financial inclusion. Many of these businesses deliver high returns on equity in their niche segments, while their valuations are relatively undemanding given their strong prospects. The key is to back the right management teams that execute well in these markets without taking undue risks.
Will Asian micro and monoline finance companies deliver high returns?
Past performance is not a reliable indicator of future returns. Note the views expressed may no longer be current and may have already been acted upon. Reference to specific securities should not be interpreted as a recommendation to buy or sell these securities but is included for the purposes of illustration only. The shares in the Fidelity Asian Values PLC are listed on the London Stock Exchange and their price is affected by supply and demand. The trust can also gain additional market exposure through gearing, potentially increasing volatility. Investments in overseas markets may be subject to currency fluctuations. Investments in small and emerging markets can also be more volatile than other more developed markets.
Five forces powering the Asian century
Amid short-term pressures, a handful of forces continue to drive long-term growth and regional restructuring
Countries like the Philippines are growing fast while others like China are beginning to age and accumulate wealth - spurring new financial, lifestyle and healthcare industries.
A growing, changing population(1)
Asia is also getting richer. Of the next 1 billion members of the global middle class, 90% will be in Asia.(4)
Rising middle class
Meanwhile, in terms of total middle class consumption, China will likely spend more than the US in 2020 and India is catching up fast (PPP, constant 2011 trilllion $ and global share).
Deepening intra-regional trade
Half of Asia’s population now lives in an urban area(6), fuelling the rise of megacities with more than 10 million inhabitants.
Multiplying megacities
Asia, with half the world’s internet users, is also a nursery of unicorns ($1 billon value start-ups)(5)
Booming internet business
India's population 2019: 1.36bn 2030: 1.5bn
Shanghai 2018: 26m 2030: 33m
Asia has the two most populous countries in the world, with India outgrowing China in the 2020s and growth strong in other parts of Asia as well.
Delhi 2018: 29m 2030: 39m(8)
China's population 2019: 1.43bn 2030: 1.46bn
Philippines population 2019: 108m; 2030: 124m(1)
Number of megacities - asia vs global(7)
By 2030, 2/3 of the global middle class are likely to be Asian(4)
Global total
2018
2025
49
40
Asia: 33
Asia: 26
Delhi and Shanghai are the world’s second and third largest cities, after Tokyo
4
5
3
Stronger trade ties
Services trade growing fast
Self-contained regional supply chains
Asia vs the US for intra-regional trade(5)
52%
41%
vs
$38.4bn
Alibaba’s Singles Day record sales total in 2019(9)
(5) McKinsey Global Institute, Asia's Future is Now, July 2019 (6) United Nations, World Urbanization Prospects: The 2018 Revision, p.xix (7) GlobalData, February 2019 (8) UN, The World’s Cities in 2018, p4 (9) Sherisse Pham, CNN Business, 12 November 2019
(4) Homi Kharas, The Unprecedented Expansion of the Global Middle Class: An Update, 2017, Brookings, p13, p11, p16
Still growing - Asia’s 10-year growth could be equivalent to the US population in 2019
Sources. (1) UN World Population Wallchart 2019 (2) UNFPA, Asia & the Pacific (3) Worldometers, using UN data; see also UN, Population 2030
China’s changing consumer tastes
Fidelity’s Hyomi Jie explores key opportunities in the restructuring Chinese economy
The rise of domestic brands that capture more sophisticated consumer tastes will create some compelling investment opportunities
By design, as portfolio manager of the Fidelity China Consumer Fund, I look to avoid heavy industrials like commodities and energy, as well as banks. Although important, these sectors are typically more mature, offer less growth and have strong state ownership, and thus generally focus less on generating returns for minority shareholders.
Although the consumer story has been a dominant theme in China for some time, what is perhaps less well appreciated is the extent to which the dynamics of this story are changing. Since the turn of the century, China has seen a tremendous growth of wealth due to better paid jobs. This was initially led by international businesses setting up in China to take advantage of low wages and a large workforce, but now we see local companies adapting and innovating to become industry leaders and catering for a local population with greater earnings power.
Elsewhere, with many people in China having now purchased basic consumer goods, there is a natural progression towards buying services and experiences. This will drive long-term demand for travel and experiences such as dining out. It will also drive greater demand for education. The private education industry has faced some regulatory headwinds, but these are now easing and companies with large enrolment and strong balance sheets will be able to consolidate and gain market share, which should be reflected in higher share prices for investors over time.
Important information: The above video is for investment professionals only and should not be relied upon by private investors. The ideas and conclusions here do not necessarily reflect the views of Fidelity’s portfolio managers and are for general interest only. The value of investments can go down as well as up, so your clients may not get back what they invest. This video may not be reproduced or circulated without prior permission. No statements or representations made in this video are legally binding on Fidelity or the recipient. Reference in this article to specific securities should not be interpreted as a recommendation to buy or sell these securities, but is included for the purposes of illustration only.
Hyomi Jie
he opportunity to invest in how and what China consumes is significant and affects a broad range of companies beyond traditional consumer sectors. The short-term impact of coronavirus will be significant as we discuss in the video
at the bottom of this article. But it should not steer the structural consumption story in China off course. What is more, this story – powered by the twin drivers of the rising middle class and urbanisation – still offers a long growth runway.
The first wave of the consumer story saw people simply buying everyday goods like TVs, fridges and cars. While there are still vast untapped markets here, such as rural China, we are also entering a new stage of consumption - services and premiumisation.
I believe the trend of premiumisation and the rise of domestic brands that capture more sophisticated consumer tastes (that also want to stay true to their Chinese heritage) will become increasingly prominent and create some compelling investment opportunities.
Trading up
Many Chinese companies are recognising and responding to this trend by implementing multi-pricing strategies. For example, China’s largest brewer, CR Beer, now has a number of brands in its portfolio that tap in to different market segments and generate a desire for customers to purchase the next tier up. As a result, CRB now caters for all income groups and, without knowing, the consumer is frequently faced with a choice of multiple CRB brands when choosing what to drink.
CR Beer offers a choice to suit each market segment
Domestic fashion companies are also taking notice and are building premium lines for their brands. Sports company Li Ning, a company well-known in China for functional sportswear, has developed a high-end streetwear line that has been seen in New York Fashion Week. Another company is JNBY, which has one of the biggest shares among domestic designers in the affordable luxury market and has successfully been able to adapt to fast-changing fashion trends. A common thread between these companies is that they are producing fashion for a domestic Chinese market place with clear local twists, such as incorporating Chinese characters onto clothing.
Fidelity China Consumer portfolio managers, Hyomi Jie and Raymond Ma discuss the impact of Coronavirus on consumption trends in the region. They outline why, despite the virus, they are seeing pockets of opportunity in the near term as consumers turn to online grocery shopping and look at the potential impact of the built up demand being created whilst normal life is on hold.
Covid-19: The impact on Chinese consumption activity and trends
Past performance is not a reliable indicator of future returns. Note the views expressed may no longer be current and may have already been acted upon. Reference to specific securities should not be interpreted as a recommendation to buy or sell these securities but is included for the purposes of illustration only. The Fidelity China Consumer Fund can use financial derivatives which may expose it to a higher degree of risk and can cause investments to experience larger than average price fluctuations. Investments in overseas markets may be subject to currency fluctuations. Investments in small and emerging markets can also be more volatile than other more developed markets. The above video may not be reproduced or circulated without prior permission.
Active in Asia for over half a century
Over half a century, Fidelity’s understanding and knowledge of the region has compounded to provide our portfolio managers with a truly unique and independent view of the factors shaping returns from Asian companies
Fidelity Asia Fund
Managed by Teera Chanpongsang since 1 January 2014
A core fund of quality well-run companies that are positioned to benefit from ongoing structural change and reforms across the region. Teera adopts a disciplined investment process to identify stocks trading below their intrinsic value. He looks for companies where improving fundamentals are not reflected in the price, or where the growth potential is not fully understood. He also favours restructuring and turnaround opportunities, as well as cyclical turns in certain industries to find overlooked potential.
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Fund details
Annualised performance over Teera's tenure
Launch date
13 October 1984
Fund AUM
£2,988m
Holdings
80-100
Comparative index
MSCI AC Asia ex Japan
Fund returns
12.4%
Benchmark
9.0%
Peers beaten
92%
Excess returns
3.4%
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Fund ratings
Annualised performance over Dale's tenure
Net Asset Value
15.1%
Share Price
15.3%
Index
19 April 2010
£1,334m
120-160
MSCI China
Investing in the key beneficiaries of China’s new growth drivers, fully utilising the enhanced investment powers of the trust’s closed-end structure. Dale seeks out solid cash generative businesses with good long-term prospects which may not be well understood by the market, and are therefore not reflected in valuations. He also focuses on smaller companies as these tend to be less well researched and, therefore, more often mispriced.
Managed by Dale Nicholls since 1 April 2014
Fidelity China Special Situations PLC
Annualised performance over Nitin's tenure
6.8%
9.5%
7.2%
2 of 2
13 June 1996
£287m
120-200
1 of 2
Nitin is a value investor who prefers to invest in underappreciated small and medium sized companies with an emphasis on downside protection. His investment decisions are based on rigorous fundamental analysis, with a bottom-up stock selection approach making use of Fidelity’s proprietary research resources. Investing across a large and diverse universe of over 17,000 listed stocks to find Asia’s smaller companies that have the potential to turn into the winners of tomorrow.
Managed by Nitin Bajaj since 1 April 2015
Fidelity Asian Values PLC
Annualised performance over Anthony's tenure
8.8%
100%
6.5%
24 September 2014
£532m
25-35
MSCI AC Asia Pacific ex Japan
A high conviction stockpicking approach which brings together the region’s best investment ideas in a concentrated portfolio. Anthony looks for three key characteristics in a stock: weak sentiment and low valuations, where fundamentals are strong and improving relative to consensus expectations. If a stock ticks all three boxes – and liquidity is ample and correlation with other holdings low – he is willing to take a significant active position.
Managed by Anthony Srom since 24 September 2014
Fidelity Asia Pacific Opportunities Fund
Annualised performance over Dhananjay's tenure
12.6%
9.6%
96%
3.0%
11 July 2011
£90m
60-90
MSCI Emerging Markets Asia
Focused exposure to Asia’s true emerging economies such as ASEAN, China and India through a portfolio of high-quality growth stocks. A key characteristic of Dhananjay’s focus is moat stocks. In this approach he looks for companies with sustainable growth prospects with the ability to reinvest at attractive rates. Dhananjay favours industry consolidators with improving returns and is cautious on stocks with high regulatory risk.
Managed by Dhananjay Phadnis since 1 November 2013
Fidelity Emerging Asia Fund
6.1%
1.8%
73%
4.3%
14 September 2011
£170m
30-50
MSCI Golden Dragon Custom Consumer Index
Investing in companies related to what China consumers buy and the way they consume; trends underpinned by the long-term structural drivers of China’s growing middle class, rising income, increasing urbanisation and technological innovation. Hyomi looks for solid cash generative businesses based on bottom-up research and value-chain analysis, as well as looking for incremental change that will drive an improvement in a company’s earnings. The portfolio exhibits a structural growth bias and will tend to be more expensive than the broader China market as growth, and especially certainty of growth, comes at a premium.
Managed by Hyomi Jie since 1 August 2017
Fidelity China Consumer Fund
Annualised performance over Hyomi's tenure
Annualised performance over Jochen's tenure
8.9%
5.9%
77%
19 August 2013
£93m
MSCI AC Asia Pacific ex Japan High Dividend Yield
An unconstrained approach which aims to deliver a dividend focused total return with an emphasis on capital preservation. Jochen looks for companies with a good track record of capital allocation and an attractive yield struck off a dividend that will be well-supported throughout a range of economic scenarios. Combining characteristics like strong balance sheets and predictable cash flows with a strict valuation discipline also has the potential to provide strong relative downside protection.
Managed by Jochen Breuer since 1 October 2016
Fidelity Asian Dividend Fund
Past performance is not a reliable indicator of future returns. The value of investments can go down as well as up and clients may get back less than they invest. The Fidelity funds featured invest in overseas markets which means their value can be affected by changes in currency exchange rates. Some funds invest in a relatively small number of companies and, therefore, may carry more risk than funds that are more diversified. The funds may also use financial derivative instruments for investment purposes, which may expose them to a higher degree of risk and can cause investments to experience larger than average price fluctuations. Investments in Fidelity funds should be made on the basis of the current prospectus, which is available along with the Key Investor Information Document, current annual and semi-annual reports free of charge on request by calling 0800 368 1732. The shares in Fidelity investment trusts are listed on the London Stock Exchange and their price is affected by supply and demand. They can gain additional exposure to the market, known as gearing, potentially increasing volatility. They invest in emerging markets which can be more volatile than other more developed markets. They also invest more heavily than others in smaller companies, which can carry a higher risk because their share prices may be more volatile than those of larger companies and the securities are often less liquid.
Past performance is not a reliable indicator of future returns.
Discrete five year period performance overview
Source Morningstar as at 31 January 2020, bid-bid, net income reinvested. ©2020 Morningstar Inc. All rights reserved. All ratings as at 31 December 2019.
in Asia Pacific ex Japan AUM
US$53bn
Investment Professionals based across Asia Pacific
122
QFII quota, amongst the highest allocated to a foreign buy-side manager
US$1.2bn
Our WFOE has become the 1st global asset manager to register with the AMAC as a private fund manager in China
Source Fidelity International. 30 September 2019. Assets quoted include Assets under Administration. QFII = Qualified Foreign Institutional Investor; AMAC = Asset Management Association of China; WFOE = Wholly Foreign Owned Enterprise. Research professionals include both analysts and associates.
Click on one of the below for details
Fidelity's FUNDS AND investment trusts
• Asia Fund
• Asia Pacific Opportunities Fund
• Emerging Asia Fund
• China Consumer Fund
• Asian Dividend Fund
• Fidelity China Special Situations PLC
• Fidelity Asian Values PLC
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• A high conviction stockpicking approach which brings together the region’s best investment ideas in a concentrated portfolio. • Anthony looks for three key characteristics in a stock: weak sentiment and low valuations, where fundamentals are strong and improving relative to consensus expectations. • If a stock ticks all three boxes – and liquidity is ample and correlation with other holdings low – he is willing to take a significant active position.
• Focused exposure to Asia’s true emerging economies such as ASEAN, China and India through a portfolio of high-quality growth stocks. • A key characteristic of Dhananjay’s focus is moat stocks. In this approach he looks for companies with sustainable growth prospects with the ability to reinvest at attractive rates. • Dhananjay favours industry consolidators with improving returns and is cautious on stocks with high regulatory risk.
• Investing in companies related to what China consumers buy and the way they consume; trends underpinned by the long-term structural drivers of China’s growing middle class, rising income, increasing urbanisation and technological innovation. • Hyomi looks for solid cash generative businesses based on bottom-up research and value-chain analysis, as well as looking for incremental change that will drive an improvement in a company’s earnings. • The portfolio exhibits a structural growth bias and will tend to be more expensive than the broader China market as growth, and especially certainty of growth, comes at a premium.
• An unconstrained approach which aims to deliver a dividend focused total return with an emphasis on capital preservation. • Jochen looks for companies with a good track record of capital allocation and an attractive yield struck off a dividend that will be well-supported throughout a range of economic scenarios. • Combining characteristics like strong balance sheets and predictable cash flows with a strict valuation discipline also has the potential to provide strong relative downside protection.
• Investing in the key beneficiaries of China’s new growth drivers, fully utilising the enhanced investment powers of the trust’s closed-end structure. • Dale seeks out solid cash generative businesses with good long-term prospects which may not be well understood by the market, and are therefore not reflected in valuations. • He also focuses on smaller companies as these tend to be less well researched and, therefore, more often mispriced.
• Nitin is a value investor who prefers to invest in underappreciated small and medium sized companies with an emphasis on downside protection. • His investment decisions are based on rigorous fundamental analysis, with a bottom-up stock selection approach making use of Fidelity’s proprietary research resources. • Investing across a large and diverse universe of over 17,000 listed stocks to find Asia’s smaller companies that have the potential to turn into the winners of tomorrow.
