HEAD-TO-HEAD: Blackrock versus Fidelity

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Investment approach

The Blackrock and Fidelity funds were launched in 2012 and 2013 respectively and are about to hit the 10-year mark.

They both use a range of growth assets, income or yield assets, as well as some lower-risk assets to balance the portfolio, and often gain exposure to favoured asset classes through inhouse funds.

“Strategic allocation is not nailed down, but rather the funds are driven by a requirement to create income,” said Mottola.

The Blackrock fund invests globally in the full spectrum of permitted investments including equities, equity-related securities, fixed income transferable securities (including high yield securities), collective investments, cash, deposits and money market instruments, according to the fund factsheet.

Currently, the fund invests a whopping 40% of its assets in the money markets, followed by 28.5% in equities and about 20% in fixed income.

The remaining AUM is diversified into allocation, alternative, properties and commodities.

Blackrock’s return pattern is typically more like the market’s, noted Mottola.

While Blackrock doesn’t have a specific income target, Fidelity typically looks to generate a 5% yield, depending on market conditions, the researcher added.

Almost half of the Fidelity fund’s assets are invested in fixed income, followed by 24% in equities, and 15% in cash.

“Fidelity has more of a value bias in the team’s portfolios, and on the fixed income side they are heavily focusing on Asian bonds,” said Mottola.

Unlike the Blackrock fund which has a substantial amount of assets in the money market, the Fidelity fund is restricted to holding up to 25% of its AUM in cash or money markets in adverse market conditions.

“While many aspects of the strategies are similar, alternative assets play a bit bigger part in the Fidelity fund which invests in assets like infrastructure of many flavors (equities and bonds) and structured credit, to name a few,” said Mottola.

Both funds integrate non-financial, sustainability considerations into their investment process, with the Fidelity fund pledged to invest at least 50% of its net assets in securities that maintain sustainable characteristics.

Meanwhile, the Blackrock fund obtained an ‘A’ rating from the MSCI ESG Fund Rating, with a quality score of 6.28 out of 10.

Fund characteristics

Sector allocation:

Source: Morningstar, 31 March 2022

Top 5 holdings:

Source: Fund factsheets, 31 March 2022

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