HEAD-TO-HEAD: Blackrock versus Fidelity

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Investment approach

Both the Blackrock and Fidelity products invest in global financial stocks. However, the funds have different investment processes, according to Meakin.

“The Blackrock product’s key focus is relative value and the Fidelity fund is more core-like with a focus on quality,” Meakin said.

According to Meakin, the first stage of the process in the Blackrock fund is identifying financial stocks that offer relative value within their respective subsectors. After that, companies are ranked based on their fundamentals, which include cost-to-income ratio, margins, return-on-equity and balance sheet ratios.

He noted that the Blackrock fund manager also tries to avoid value traps by looking at catalysts that have the potential to realise their relative value. These catalysts include management change, mergers and acquisitions and earnings revisions.

Turning to the Fidelity fund, Meakin said that its fund manager prefers quality names or “long-term winners”. Various quantitative and qualitative metrics are considered, including margins, competitive advantages, cost of credit, dividend yields and discounted cash flows.

Meakin noted that while the Fidelity fund employs a bottom-up approach to investing, its manager also takes into consideration the macro environment and regulatory backdrop.

Both products are also different in terms of how diversified they are. The Blackrock fund is concentrated with 30-50 stocks, while the Fidelity fund is more diversified with 55-75 names, Meakin said.

The differences in the funds’ investment approaches are reflected in their country exposure and top 10 holdings, according to their fund factsheets.

Country exposure

Source: Fund factsheets. As of 31 December 2019

Top 10 holdings

Source: Fund factsheets. As of 31 December 2019

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