HEAD-TO-HEAD: Fidelity versus Income Partners

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Conclusion

Morningstar has awarded the Fidelity fund three stars, noting that short-term results under Ryu and Pang have been mixed and stating that they need to demonstrate that they can consistently add value during choppy market conditions.

“The managers seek Asia corporates and sovereigns with a higher-than-average income stream that they consider to be fundamentally sound. While this approach has delivered solid returns over the long term, the mandate’s aim to maintain a high level of yield for investors in distribution share classes has resulted in risk management concerns,” it said.

Morningstar has awarded the Income Partners fund four starts, citing its strong scores for people and processes, although it notes that fees remain an Achilles heel as it is priced within the highest quintile among peers.

Its overall performance is mixed depending on whether you compare it to its peers, where it has outperformed, or with the category benchmark, the JP Morgan ACI Non-Investment Grade Bond Index, where it has lagged.

Morningstar awards both funds with an analyst rating of neutral.

FE Fundinfo, which bases its assessment on a fund’s three-year history of delivering alpha, minimising relative volatility and producing consistent returns, awards both funds one crown.

Overall, Poole reckons that both funds are good options in an asset class that has suffered a lot lately, although he notes that Income Partners represents a somewhat lower risk exposure to the asset class and it has been a difficult period for the Fidelity fund.

“It has been a baptism of fire for the Fidelity managers and this has been reflected somewhat in the performance. But their clear repeatable process provides them a good base to rise to the challenge. It will be important to monitor how their risk management adapts through the coming years and how this performs through the upcycle in Asian credit when it does eventuate,” he said.

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