HEAD-TO-HEAD: Fidelity and FSSA

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Investment approach

Both funds have a bottom-up investment approach, although there are numerous distinct differences between the two funds.

The FSSA Asia Growth Fund focuses on high quality companies that can deliver predictable growth and so tends to place most consideration on management quality. This means it is generally underweight in those markets like China and Korea that have corporate governance issues. Indeed, China is only its third largest market with a weighting of 10.6%.

In contrast, for the Fidelity Asia Fund, the manager seeks high quality growth companies so he tends to prefer companies operating in emerging markets such as China, India and Asean. In fact, China has the largest weighting in the portfolio at 32.7% followed by India at 19%.

In terms of sector coverage, the FSSA Asia Growth Fund has a strong bias towards companies with strong franchises and durable cash flows so consumer staples feature heavily; it is the second largest sector at 20.8%, just behind financials at 22.9%.

Meanwhile, the Fidelity Asia Fund also has a high concentration among consumer names; it is the third largest sector at 18.9%. Although, financials at 32.1% is by far the largest sector, which is a reflection of the fact that the manager takes a much more benchmark-focused approach.

Indeed, FSSA Asia Growth Fund’s benchmark agnostic approach is a major differentiating factor with Fidelity Asia Fund.

“There is also a big difference in terms of how the two portfolios are constructed. For FSSA Asia Growth, when the manager constructs a portfolio, it is completely bottom up and benchmark agnostic. As a team they define the risk as a permanent loss of capital instead of short-term relative underperformance against the index,” said Liang.

FSSA Asia Growth Fund’s portfolio also tends to be far more compact with typical holdings ranging between 40 and 50 versus 70 and 90 stocks for Fidelity Asia Fund.

Unsurprisingly, given that Fidelity Asia Fund closely tracks the MSCI Asia ex-Japan index, its major holdings comprise blue-chip names such as AIA Group and Tencent Holdings, whereas FSSA Asia Growth Fund’s largest holdings are skewed towards Indian financials.

Fund characteristics

Sector allocation:

Source: Fund factsheets, September 2022

Country allocation:

Source: Fund factsheets, September 2022

Top 5 holdings:

Source: Fund factsheets, September 2022

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