The fund will sit in the IMA Cautious Managed sector and is designed to perform in all market conditions. Unlike traditional cautious managed funds, this product includes property shares and commodities. Fidelity believes these asset classes will provide greater diversification and enhance performance while reducing the overall volatility compared with pure UK funds.
The fund will be managed by Fidelity director of asset allocation Trevor Greetham. He has 16 years’ investment experience including 10 years at Merrill Lynch.
Greetham will select funds from Fidelity’s own range across the asset classes but it will not invest directly in commodities. instead it will buy futures contracts on a commodities index.
Greetham will drawing on research from Fidelity’s Asset Allocation Group to identify the current stage of the economic cycle and what mix of assets is most appropriate for each stage.
The neutral weightings for each asset class can be varied up or down by up to 10 per cent to reflect the most appropriate mix for any given point in the cycle. Greetham will be defensive when the portfolio needs to be, but will move into more growth-oriented assets when necessary.
Any asset shift in the portfolio will tend to be a gradual process because the transition from one stage in the economic cycle to another tends to be piecemeal rather than large leaps.
This fund could attract IFAs who are looking to outsource asset allocation decisions to a well known name with a lot of resources at their disposal.
However, gaining exposure to the underlying asset classes only through Fidelity funds is a double edged sword. While Greetham will know the underlying funds intimately, he will not be able to tap into good managers outside his own investment group.