HEAD-TO-HEAD: Blackrock versus Fidelity

123456

Investment process

Both the Blackrock and Fidelity funds are global multi-asset products that provide regular income to investors, according to Claus.

The products are highly-rated by Morningstar and are “above average” compared to their peer groups, Claus said.

“Unlike other products, they have not eaten their capital to provide income to investors since they launched,” she said.

The products are very similar in terms of asset allocation and strategy.

Source: Fund factsheets

On the equities front, both products prefer to seek an income source through stocks that have an above average dividend yield, according to Claus.

“They are also value-biased. Other multi-asset portfolios have a growth bias, such as investing in technology stocks, but you don’t see much high dividend yields from those.”

The Blackrock fund has 10.6% of its assets in tech stocks, while the Fidelity fund has 11.8%, which are lower compared to the peer average allocation of 14.1%.

On the fixed income side, Claus said that the products usually would have a large allocation to high yield bonds.

“The yield target for their fixed income portfolios is quite important. So they have above average high yield allocation in their fixed income portfolios when compared to their peers.”

Assets in high yield bonds in both funds are at around 20% of their portfolios, according to Claus.

She added that both products also use covered call strategies and REITs to generate income.

The difference

There are, however, slight differences between the two funds.

While both products have income targets, the Blackrock fund has a higher target of 5-6% annually, while the Fidelity fund’s target is 4-5%.

A bigger difference is clear in geographic allocations, according to Claus. The Blackrock fund has a higher allocation to US assets than the Fidelity product and differs significantly from Fidelity in Asia-Pacific, Europe and Japan weightings.

“The Blackrock fund may have a bias to US assets, while the Fidelity fund has more geographical diversity,” she added.

Geographic allocation (%)

Source: Fund factsheets

123456