HEAD-TO-HEAD: Fidelity versus Income Partners

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Investment approach

Both funds benchmark themselves against the JP Morgan ACI Non-Investment Grade Index benchmark, which marks a change from the ICE BofA Asian High Yield Corporate Index. Both funds can invest in investment grade, but the vast majority for both is in high yield (just under 90% for Fidelity and around 75% for Income Partners).

Both funds also have a clear geographical focus on Greater China as well. FE Fundinfo does not provide a breakdown of Fidelity’s allocation by country within Asia ex-Japan, ex-Australia, although a sizeable 82.87% is invested in the region. Meanwhile, for Income Partners, 38.5% is invested in China followed by 15.8% in Hong Kong and 7.1% in Macau.

The top five holdings for both funds include a smattering of Greater China companies, particularly from Macao’s gaming sector given its outsized position in Asia’s high-yield sector. These include Studio City Finance (3.42%) and Melco Resorts Finance (3.39%) for Fidelity and Sands China (2.8%) for Income Partners.

Fidelity’s largest weighting at 3.57% is in Hong Kong-listed Nwd Finance, while Income Partners has its largest exposure to Export-Import Bank of China at 4.4% and PCCW Limited is third at 2.8%.

However, the major difference between the two is their approach to volatility as Fidelity has historically placed more emphasis on income, which has resulted in greater concentration in China property, although they have been lowering this more recently and also hold a sizeable 10.83% of their portfolio in cash to try to mitigate it.

“The key difference in process is risk management. Income Partners places considerable value on managing volatility in an asset class that has historically had relatively high volatility,” said Poole. “That does show through both in the portfolio construction and realised volatility measures compared with Fidelity, where the stronger focus on income has increased realised risk.”

Fund characteristics

Sector allocation:

Source: Fund factsheets, 30 September 2022

Country allocation:

Source: Fund factsheets, 30 September 2022

Top 5 holdings:

Source: Fund factsheets, 30 September 2022

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