HEAD-TO-HEAD: Alliance Bernstein vs Fidelity

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Conclusion

Both funds have disciplined investment processes and strategies, and are supported by strong research teams.

“Ultimately, duration preferences are the key consideration for investors when they assess the two funds,” said Ng.

The AB’s fund’s short duration, in theory at least, “provides investors with greater capital protection because of its lower interest rate sensitivity,” said Ng.

So it could be expected to do better if a strong US economy induces the Fed to raise interest rates.

The fund is also more diversified, which should mitigate credit risk.

“However, the high fees charged by the AB fund should be taken into account by [prospective] investors,” said Ng.

“The Fidelity fund’s performance is more closely correlated to the direction of the US economy. If economic activity expands, then the prospect of higher US interest rates to curb inflationary tendencies would have a negative impact on the fund’s performance,” he said.

“However, if there is poor economic data then the Federal Reserve is likely help stimulate activity with lower interest rates in order to prevent a slide into recession. In this environment, the Fidelity fund, because of its longer-duration and its high weighting to US treasuries, should perform well.”

The Fidelity fund is more highly rated by both FE Analytics and Morningstar with three crowns and five stars respectively, compared with one crown and four stars for the AB fund.

The FE rating methodology assesses the fund’s alpha, volatility and consistency of performance while Morningstar looks at historical risk-adjusted performance.

“Ultimately, the Fidelity fund has a better performance history,” said Ng.

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