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High Fidelity in the groove

Fidelity International UK retail managing director Gary Shaughnessy is upbeat about the opportunities in the market at the moment.

The former Prudential retail life and pensions managing director says Fidelity’s fund business has gone from having net outflows a year ago to inflows now.

He says: “We have seen a combination of very strong flows into anything that is income-related, the MoneyBuilder income and sterling bond fund in particular.”

Shaughnessy says Fidelity is benefiting from the flight to quality and investors are favouring quite a broad range of sectors, including multi-asset strategic funds, the cautious managed sector, income, special situations and corporate bonds.

He says: “If you look at Investment Management Association statistics, corporate bond sales generally are positive and we have been a participant in that. I think equities, certainly on the January numbers, were in outflow and we bucked that trend in seeing inflows.”

In recent weeks, there has also been a rush to invest in US equities, partly arising from the belief that the US was first into the recession so may be first to emerge.

He says redemption levels are down and the business is seeing less switching as people sit back and wait to say what the markets do.

Shaughnessy is not worried about the prospect of a corp- orate bond bubble and says there is a much “sharper distinction between winners and losers” in bond funds.

“I think our view would be that there is value but you have got to be very diligent in terms of individual covenant selection and also in making sure portfolio construction maximises liquidity.”

On his move from Prudential last year, he says there are similarities, in that both Pru and Fidelity have a distinctive culture and both have picked up on the massive ongoing transfer of responsibility in retirement provision from companies to individuals.

He says: “I think inevitably Fidelity does have a distinctive culture driven partially by private ownership and partially by it being very much investment-led and a bottom-up stockpicker at heart.

“It is just a fascinating environment in that you have got some really smart people and an environment in which challenging debate is really encouraged.”

Shaughnessy is responsible for three areas of Fidelity – the retail fund management business, FundsNetwork and the defined-contribution business.

He says: “Even though the markets are really tough, we can see some real opportun-ities to grow over the next five to 10 years.”

He sees FundsNetwork growing as legacy products move on to platforms and with the increased move from unit-linked products to collectives.

In this economic climate and with the transfer of responsibility to individuals, he believes people need advice more than ever. He says: “People who previously might have been able to rely on the comfort of a solid defined-benefit scheme are now having to look after their own retirement.”

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