HEAD-TO-HEAD: Axa versus Fidelity

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Investment process

Both the Axa and Fidelity funds invest in global developed real estate stocks. They also have the same benchmark index, the FTSE EPRA Nareit Developed Index. However, the products are different in terms of the type of companies they invest in as well as how diversified they are, according to Van Genderen.

The Axa fund has a strong focus on quality companies.

“At the very first part of the process, the fund’s investment team already screens out companies that have weak corporate governance or poor balance sheets.

“For the remaining part of the process, the team will choose the strongest businesses with [what they believe to be] good quality management,” he said.

Turning to the Fidelity fund, Van Genderen explained that the product invests in both quality companies and what Fidelity calls “dynamic value stocks” – companies that are either undergoing a turnaround situation or are underappreciated by the market, he said.

The split between the two stock categories is not equal, however. Quality companies make up around 30%-50% of the portfolio, while the remainder is invested in dynamic value stocks.

Therefore, the Axa product’s style is tilted toward growth companies, given its quality bias, while the Fidelity fund’s style includes both value and growth, Van Genderen said.

Top 10 holdings (as of 31 October 2019)

Source: Fund factsheets

The number of stocks that both products generally hold are also different, according to Van Genderen.

The Axa fund is the more diversified of the two, with around 70-80 names, while the Fidelity product is concentrated with about 30 stocks.

Van Genderen noted that the Axa fund had more holdings before – around 100 up until 2012 — when the team decided to be more active in their approach.

Turning to the Fidelity fund, he said that it is one of the most concentrated real estate equity products in the market.

“That is something that we like. I think you need a certain level of active management to make up for the [higher costs of active funds when compared to passive products].”

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