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Both the Blackrock and the Fidelity funds are global multi-asset income funds, which promise to provide an annual income stream to investors, according to Mottola.
The funds are very similar in terms of asset allocation, with at least 50% of assets in fixed income. Mottola believes that what sets them apart from traditional multi-asset funds is an allocation to alternative assets.
“Both of these portfolios are more diversified than traditional allocation funds. So they have equities and fixed income as in typical allocation funds, but they also have alternative assets.”
However, their respective alternatives strategies are also differentiated, according to Mottola.
The Blackrock fund makes use of an options strategy that allows it to get some income through the selling of options on equities.
The Fidelity fund, by comparison, invests in infrastructure projects for its alternatives sleeve, Mottola said.
Both funds also invest in listed real estate vehicles.
Mottola added that the Fidelity fund’s strategy takes slightly more risk, largely through more equities, compared to the Blackrock fund.
“The risk is broadly similar, but the Fidelity fund has had slightly higher standard deviation historically, so they are taking slightly more risk in their investing. But the difference is quite small.”
Another difference that Mottola highlighted is annual income payout. The Blackrock fund has a higher annual yield of 5-6%, while the Fidelity fund is slightly lower at 4-5%.
“For the Blackrock fund, they get the payout from the income stream, not from [capital appreciation]. And despite having lower volatility, they have been able to provide [a comparatively] higher income, so they have a very strong focus on that income creation.”
Turning to the Fidelity fund, Mottola explained that it also has a focus on providing income, but it has a “growth aspect” in which one of the aims is capital appreciation.
“At a broad level, they are similar strategies in that they divide the assets that they look at into similar kinds of buckets and have fairly similar risk levels. The differences are more on the [alternatives allocation] and the respective income levels that the products have provided.”