HEAD-TO-HEAD: Alquity versus Fidelity

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Source: FE Fundinfo. Three-year cumulative returns in US dollars.

Performance

The Alquity fund has generated a three-year cumulative return of 30.44% in US dollar terms, with annualised volatility of 24.40%, according to FE Fundinfo. It has underperformed the sector average of 35.26%, and also the MSCI India index’s return of 48.22% – although the fund has no specified benchmark. It has also been more volatile than both reference measures, which have annualised volatilities of 20.90% and 22.23% respectively.

However, the fund posted a strong performance in 2021, returning 36.98%, compared with 24.33% by its peers and 26.66% by the MSCI India index, and it also had a superior performance in 2017, posting a return of 59.69%, compared with 38.98% for the sector and 38.76% for the index, according to FE Fundinfo.

The fund has a much stronger focus than the Fidelity fund on domestic India and on companies operating in more specific industries, as such they are more in control of their own destiny, according to McDermott.

“These mean that manager Sell’s analysis has much greater influence over the potential performance which could be critical in a volatile market. It could underperform in periods where domestic India itself struggles, or smaller companies underperform generally.”

The Fidelity strategy has done better over three years, generating a cumulative return of 41.47% with annualised volatility of 21.75%, FE Fundinfo data shows. But, it has had week start to 2022, and is down 10.31%, compared with -8.38% by the Alquity strategy.

The Fidelity fund’s portfolio is “more expensive than the market, but has a higher return on equity, and this should come through in performance,” he said.

As a result of its larger cap/core approach, the companies it owns are focused on more specific sectors such as financials and IT outsourcers.

“The fortunes of firms in these areas can be quite reliant on factors outside of their control – for financials this could be related to monetary policy or regulation, and for IT outsourcers, dependent on the rest of the world and their attitudes.”

“You would therefore expect the fund to underperform when these areas or large caps in general are struggling and outperform when the opposite is the case,” said McDermott.

Discrete calendar year performance

Source: FE Fundinfo. Annual returns in US dollars. *31 Dec 2021 – 13 Mar 2022; ** reference only.

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