Best Fund Provider – High Yield Bond
The strength of the franchise is underpinned by the firm’s credit research capabilities — a key lever for alpha generation — as well as by its long-standing experience and established track record in this asset class.
Since 2000, when we first invested in high yield bonds, our understanding of this asset class and its nuances has grown considerably, as have our investment resources and AUM in this area.
As of end Q3 2019, Fidelity had 34 credit analysts globally (with an average industry experience of 13 years), to provide sound credit ideas to the wider fixed income portfolio management team comprising of 21 portfolio managers globally (with an average industry experience of 18 years).
A true pioneer in the space — having invested in the Asian high yield markets since 2007 — Fidelity’s offering in 2019 included two of the most compelling strategies in the asset class. Both the Fidelity Asia High Yield and China High Yield funds aim to deliver capital appreciation and a high level of income by investing primarily in debt securities of sub-investment grade companies across Asia and China respectively. Both stood out among peers for their performance (5.0% p.a. and 6.3% p.a. for the A-ACC-USD share classes since launch to end November 2019 respectively, net of fees) and defensiveness, with less than 5% annualised volatility over the last three years (as of end November 2019).
Fidelity’s investment philosophy is that high yield markets function in a semi-efficient manner and possess a number of unique characteristics. Accordingly, the firm placed a great emphasis on resourcing and configuring so as to exploit those inefficiencies. Its credit research team had an average industry experience of 13 years and a commensurate output of due diligence and ideas that produced a track record of steady risk-adjusted returns. The investment team behind the Asian and China high yield franchise alone ranked among the industry’s most experienced and well-resourced.
And this showed in the strong performance in 2019 of both of Fidelity’s aforementioned high yield strategies, which was largely attributable to the investment team’s decision to progressively add risk during the second half of 2018 as spreads widened. Furthermore, AUM in its Asia High Yield Fund had reached US$5 billion as at 30 November 2019 (an increase of around US$1.1 billion over the preceding 12 months) and US$923 million in its China High Yield strategy (up approximately US$844 million over the same 12 month period).
Fidelity International also continued to invest in its private banking-focused sales and servicing team in the region, making key strategic hires over the past 18 months and ensuring its internal resources and processes were sufficiently streamlined to ensure that its clients’ needs were met with agility and innovation.
The firm is clear about the importance of Asia’s private banking industry in terms of the manager’s ability to achieve its ambitions. Fidelity aims to double its assets in the channel in the next three years and — armed with one of the largest distribution and investment specialist teams in the region — has prioritised engaging its partners on a business-to-business level and providing maximum access to its experts to facilitate this growth.
Fidelity International is Asian Private Banker’s Best Fund Provider – High Yield Bond.