Manager review
Angel Agudo, manager of the Fidelity fund, is a relative newcomer to the investment industry and has been managing this strategy since 2012. He became lead manager of the fund in June 2014. He joined the firm in 2005 initially as an analyst.
Agudo is supported by Fidelity’s team of 17 analysts dedicated to covering the US equity market, all based in London.
However, “70% of ideas come from Agudo’s proprietary screening and only 30% is from Fidelity research” Tsymbaluk said.
The Legg Mason fund is co-managed by Richard Freeman and Evan Bauman under the US-based Clearbridge subsidiary.
Freeman, who is among the industry’s longest-tenured investors, has more than 40 years of experience and has managed this strategy since its inception in Oct 1983, Tsymbaluk noted. Bauman has been with Clearbridge since 1996.
The duo mainly generate their own ideas, relying on the Clearbridge analyst team mainly for due diligence, including attending industry conferences and management road shows that feature the fund’s existing holdings.
They also put their own money into the fund, she added. Freeman has more than $1m invested in the US-domiciled fund, while Bauman has between $500,000 and $1m.
Fees
The latest ongoing charges (OCF) of the Fidelity product (Class A) are 1.88%, as of August 2016. It is more expensive than the Morningstar US large-cap blend equity category average, which stands at 1.6%.
The OCF of the Legg Mason fund (Class A Acc) is slightly lower at 1.77% as of February this year, in line with the category average.
Conclusion
Morningstar’s Analyst Rating is forward-looking analysis of a fund. Analysts assign the ratings on a five-tier scale with three positive ratings of Gold, Silver, and Bronze, a Neutral rating, and a Negative rating.
A Gold, Silver, or Bronze rating means Morningstar analysts think highly of the fund and expect it to outperform over a full market cycle of at least five years.
The Legg Mason fund receives a higher positive rating (Silver) than the Fidelity fund, which gets a Bronze.
“Both are high-conviction portfolios, although Legg Mason is more so,” Tsymbaluk said, as it “focuses on “all weather” companies with recurring revenues, strong cash flow and quality balance sheets.
“Fidelity looks to build a portfolio of high-conviction stocks that are at different stages of their recovery process, and can thus deliver outperformance across different market environments.”
But, “investors need to view the Legg Mason high conviction fund as a long-term holding. Even though the fund entails higher volatility, it has proven it can bounce back and investors have been duly rewarded over time for the extra risk taken”.
Comparatively, Fidelity fund has a more distinct value bias, so it is likely to suffer when the value style is out of favour, she noted.
