HEAD-TO-HEAD: Fidelity vs JP Morgan AM

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Investment process

Both funds invest in Asia-Pacific equities including Japan and employ a bottom-up process. However, the two strategies are very different, with the Fidelity fund allocating more to mid- and small-cap companies and the JP Morgan product invested heavily in large-cap companies, according to Ng.

“The Fidelity fund is biased towards smaller cap companies,” Ng said, adding that the product also differs from most peer funds, which tend to be mainly invested in large-cap companies.

Source: Morningstar

“[Fidelity] is focused on the smaller companies because the fund manager believes that the smaller company universe is less covered by analysts, so there will be more mispricing opportunities.”

While the fund manager seeks companies that have long-term growth prospects, Ng believes that he takes into consideration valuations, given that mispriced opportunities are sought.

Turning to the JP Morgan product, Ng said that the fund has a bias toward large-cap companies.

Part of the reason is the fund’s investment process — it focuses on quality-growth companies, which are companies that have long-term growth prospects and at the same time are industry leaders.

These companies are what the firm calls “premium stocks”, which provide long-term compounding returns, Ng explained.

“While both funds try to identify quality stocks, the JP Morgan fund is willing to pay higher valuations in return for growth,” he added.

Given the differences in the funds’ market cap allocation, both products are also different in terms of the number of stocks they hold.

The Fidelity fund is more diversified, with around 216 holdings, while the JP Morgan fund is concentrated with 56 stocks.

Ng explained that it makes sense for the Fidelity fund to have more holdings given its exposure to small-cap companies. “Liquidity is one of the concerns with holding small-caps, that’s why it has a more diversified portfolio,” he said.

Another difference is benchmarks. The Fidelity fund’s benchmark is the MSCI AC Pacific Index, while the JP Morgan fund’s benchmark is the MSCI AC Asia Pacific Index.

Ng explained that there are slight differences between the two indices. The AC Pacific Index does not include India while the AC Asia Pacific Index does.

However, the Fidelity fund has an off-benchmark allocation to India, which accounts for around 3% of its portfolio, he said.

Country allocation

Source: Fund factsheets 

Sector allocation

Source: Morningstar

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