HEAD-TO-HEAD: Fidelity versus First State

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INVESTMENT APPROACH

Rigorous stock selection, disciplined processes and clear investment philosophies characterise both of these large, well-regarded funds, according to Poole.

Dhananjay Phadnis, manager of the Fidelity Asia Focus Fund, uses three pillars for determining portfolio composition.

First, “he identifies companies with resilient economic moats,” that is companies with the ability to maintain competitive advantages over competitors in order to protect their long-term profits and market share.

Second, “Phadnis seeks evidence of quality management, who demonstrate their commitment to aligning their businesses with shareholders and adopt good governance practices,” said Poole.

Finally, valuations are important to Phadnis, who looks for stocks trading below their intrinsic value, or which are temporarily out-of-favour but are likely to recover when a catalyst occurs, according to Poole.

In practice, the Fidelity fund has a bigger emerging market weighting than the First State fund, and it has an especially large allocation to China, he noted.

Martin Lau and Richard Jones, manager of the First State Asian Equity Plus Fund, also have a three-pillar investment approach.

“They are quality-focused, require earnings visibility and have a long-term growth perspective,” said Poole.

ESG factors “overlay the fund’s strategy”, he added, which is most clear in the managers’ insistence on strong corporate governance practices, he added.

Dominant themes are consumer franchises and healthcare, which are sectors that should continue to benefit from long-term structural changes in Asian economies, according to Poole.

“But, the most fundamental feature of the Lau and Jones philosophy is to avoid losing money for their investors,” he said.

Fund characteristics

Country allocation:

Source: Fund factsheets, 31 July 2020

Sector allocation:

Source: Fund factsheets, 31 July 2020

Top 5 holdings:

Source: Fund factsheets, 31 July 2020

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