Aim: Income and growth by investing in a range of asset classes
Minimum investment: Lump sum £1,000, monthly £50
Investment split: 35% equities, 40% bonds, 10% commodities, 5% property, 10% cash
Isa link: Yes
Pep transfers: Yes
Charges: Initial 3.5%, annual 1.25%
Commission: Initial 3%, renewal 0.5%
Tel: 0800 414181
Fidelity has brought out its multi-asset strategic fund, an Oeic fund of funds designed to perform in all market conditions by providing exposure to equities, bonds, property shares, commodities and cash. Unlike traditional cautious managed funds, this product also includes property shares and commodities.
Morgan’s Independent Advisers director Martin Dilke-Wing thinks Fidelity does not stand to gain much from this fund launch, unless it can demonstrate excellent performance and the fact that its model works in the relatively short term. However, he believes the fund could be useful for IFAs and their clients who do not want to try to identify market cycles and manage their portfolios accordingly.
Discussing the fund’s investment strategy, Dilke-Wing says: “In attempting to position the asset allocation to match the perception of the position of the global economy in cyclical terms, the fund will automatically rebalance to optimise exposure to what the manager perceives as being the most likely areas to make profits or preserve gains.”
In providing a degree of exposure to commodities and property, the fund aims to take away the need for IFA and their clients to try to predict at which point these asset classes should be included or removed from a portfolio to manage volatility and ensure diversification. “This is an area where many IFAs and their clients will have little first-hand knowledge, particularly if Fidelity demonstrates that it is able to call the commodities market correctly, even though the exposure to commodities and property is relatively limited in terms of the model portfolios,” says Dilke-Wing.
Examining the charges Dilke-Wing says: “They are very fair in that Fidelity will allow investors to come in with effectively no initial charge except what the advisor wants to take as commission. The annual management charges is no worse than would be expected for a fund of this type,” he says.
Dilke-Wing’s assessment of the fund manager’s credentials begins with the Fidelity brand. “The strength of the Fidelity brand is likely to be of use to IFAs in that it will provide a degree of comfort for many mainstream investors with limited knowledge or experience of fund management companies,” he says.
Considering the potential drawbacks of the product Dilke-Wing says: “The fund is essentially a cautious managed fund with a few bells and whistles. The existence of property and commodity exposure is trumpeted by the fund as if it was going to make all the difference to an investor’s portfolio returns. This may or may not turn out to be the case but at the end of the day the exposure of the fund to these asset classes is going to be around 10-15 per cent.”
This leads Dilke-Wing to conclude that the major driver of performance, assuming commodity and property markets do not continue to display the level of volatility they have over the last few years, will be equities and bonds. He notes that bonds may be more important as the bond proportion of the portfolio accounts for nearly half of the target weighting.
“The question therefore is whether or not you would choose to invest a cautious managed portfolio with Fidelity. Despite the impressive and comprehensive literature to go with the fund launch that illustrates the fact that Fidelity is not simply a stock picker, I have my doubts.”
Scanning the market for possible competitors Dilke-Wing thinks the main competition will be provided by combinations of more traditional cautious managed funds used in conjunction with specialist commodity funds, property trusts or Reits. In particular, he highlights Investec’s cautious managed fund, specialist commodities funds from the likes of M&G and JPMorgan and property trusts from New Star and Aberdeen. “I suspect that many advisors will continue to use platforms or Skandia to construct portfolios, or to delegate this function to discretionary managers where the client has sufficient assets to justify this.” He thinks that the Fidelity fund will end up as a repository for relatively small amounts from looking to achieve a degree of low risk diversification with a limited sum of money.
Summing up Dilke-Wing says: “This fund launch is a little bit worrying in that it tends to suggest two things. First, that Fidelity feels it has missed the boat by not offering property and commodity based funds, when surely that boat has sailed. Second, that Fidelity believes that equities are heading for stormy waters so wants to make sure it has something to sell.
“I am not convinced that when you have a good name as a manager in a particular sphere, there is anything to be gained by going out and pretending that you can be all things to all men. There is a case for Fidelity saying that clients’ portfolios should be diversified and leaving it at that.”
However, Dilke-Wing does not think Fidelity proves the case that it has any right to be investing clients’ money in the commodity or property element of the portfolio with any degree of conviction. “Therefore the launch of the fund comes across more as opportunism than as having anything radically good to offer,” he says.
Suitability to market: Average
Investment strategy: Good
Adviser remuneration: Fair