interactive investor's analysts give an update and view on the Fidelity Global Dividend Fund.
Coronavirus, trade wars, central bank monetary policy, Chinese corporate debt levels, post-Brexit trade relationships, Italian sovereign debt, you name it. There are so many threats to economic growth during what is also the longest bull market in history, some investors might start panicking.
However, they shouldn’t since there are clever options that can help them navigate market turbulence. One such option is the Fidelity Global Dividend Fund that has been built for a less stressful journey through a full market cycle.
Fidelity Global Dividend Fund was launched in 2012 and is still run by highly experienced manager Daniel Roberts, who has demonstrated talent and skill by running various dividend mandates in his career. He is responsible for all aspects of the process – from portfolio construction to instrument selection - and has the support of the wider well-resourced team at Fidelity International.
The process and objectives are well-structured. The manager has an unconstrained approach and puts strong focus on capital preservation, while at the same time aiming to provide decent growth combined with income that is at least 25% higher than that provided by the MSCI AC World Index.
The fund has a permanent quality bias and is tilted towards the value spectrum. Dan conducts most of the research himself, screening the universe for companies with sound balance sheets and low leverage, that have the ability to generate consistent cash flows and stable earnings.
Being a former accountant, he goes into greater detail and rips through the individual accounts of the companies he is interested in. Because of this, the fund offers attractive fundamental characteristics at a material valuation discount to the wider market.
What’s in it?
The strategy has been constructed with the idea of being less economically sensitive and providing an “all weather” market solution. Therefore, it is expected that the fund should have lower exposure to both stocks and sectors with cyclical features.
As at December last year, the fund had a relatively concentrated portfolio of 49 quality large cap stocks invested across different regions, with the top three largest exposures being Europe ex-UK (c.36%), North America (c.28%) and the UK (c.19%). Sector wise, the fund is defensively positioned, with largest positions in Financials (c.21%), Industrials (c.16%) and Information Technology (c.14%).
Within the top 10 holdings there are some interesting examples such as Unilever (LSE:ULVR), the consumer staples producer, which has a bias towards emerging markets and positions itself for long-term profit margin growth. The fund also owns a stake in leading European exchange Deutsche Boerse (XETRA:DB1), which provides exposure to high-quality and cash-generative assets on a relatively cheap valuation.
How does it perform?
|5-yr discrete performance (%)||01/02/2019 - 31/01/2020||01/02/2018 - 31/01/2019||01/02/2017 - 31/01/2018||01/02/2016 - 31/01/2017||01/02/2015 - 31/01/2016|
|Fidelity Global Dividend Fund||18.56||5.54||5.58||23.26||5.64|
|MSCI ACWI Index||15.79||0.02||12.78||32.96||-1.32|
|Morningstar Global Equity Income Sector||12.23||-2.19||7.48||27.73||-1.75|
Source: Morningstar Direct as at 31st January 2020. Total Returns in GBP.
The fund has demonstrated excellent numbers since inception in 2012. Over a five-year rolling period, it delivered over 12% annualised return versus just 3% for the Global Equity Income peer group average.
More importantly, this performance has been achieved by using a lower degree of risk than the peer group, meaning the fund has a higher risk-adjusted returns profile. In addition, the fund has a beta of 0.82 which means it is less exposed to systematic (overall market) risk, which is one of the main objectives for the manager. Currently, the fund’s yield is around 3%.
The ii view
Fidelity Global Dividend features on interactive investor’s Super 60 preferred range of active and passive investments as a Core Global Equity Income recommendation.
The fund offers a sound, high-conviction portfolio of quality global large cap companies with a focus on valuation and downside protection in order to deliver solid risk-adjusted returns over the long-term. In addition, there is a specific dividend target, further supporting absolute performance, which has been excellent over multiple periods.
This fund may fit the needs of investors with lower risk appetite, who are seeking global exposure and the additional benefit of regular dividend payments. Being a strong option for building a core portfolio, Fidelity Global Dividend has a value tilt, so investors might want to complement it with another more growth-oriented strategy.