Manager review
The portfolio managers of the AB fund are Jorgen Kjaersgaard and Gershon Distenfeld, who specialise in European credit and high yield assets, respectively.
For Fidelity, the fund is managed by Andrei Gorodilov, who took over manager responsibility from Ian Spreadbury in February 2013. Gorodilov was the deputy manager of the fund prior to taking over his incumbent role.
“There are no obvious changes regarding the investment process and style before and after the manager change,” Ng said.
Fees
The annual management fee for the AB product is 1.2%. The ongoing charges (OCF) are 1.49%.
For Fidelity, management fees are 1.49% and the OCF is slightly lower at 1.39%.
Ng said the costs of the funds are generally in line with their peers.
Conclusion
Both AB and Fidelity have strong processes to guide their investment approaches, Ng said.
“Valuations of the asset class are not particularly expensive, and the accommodative monetary policies of the ECB shall provide some support to the asset class in general.”
At the same time, the US has started tightening its monetary policy. “In this context, apart from the individual fund consideration, we need to consider the potential of euro depreciation.”
Ng pointed out that foreign exchange conversion could affect the overall return in the euro-denominated funds.
“For Hong Kong investors, when they invest into the fund, probably in the euro asset class, they need to exchange the money into euro, and this may affect the overall return when they redeem the funds following the foreign exchange conversion into the local currency later. The depreciation would probably affect the overall return, although it won’t be reflected in the performance itself.”
Ng said it is hard for him to give a clear recommendation between the two funds, as AB has limited public information of its industry breakdown.
In the context of global market volatility, which is expected this year, the AB fund’s higher credit ratings may look slightly better than the Fidelity fund, given its higher downside protection risk, Ng added.
