HEAD-TO-HEAD: Fidelity vs Investec

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The Fidelity and Investec funds both invest in global equity markets and employ a bottom-up investment approach. The Fidelity fund holds 50-90 positions, while the Investec fund has 80-100.

Ng said the main difference between the two funds is the markets they invest in.

The Fidelity fund is more biased toward developed markets. By comparison, the Investec fund has more exposure to emerging markets.

The geographic exposure difference is linked to the composition of each fund’s benchmark index, Ng explained. The Fidelity fund uses the MSCI World Index, which includes 23 developed market countries, while the Investec fund’s benchmark is the MSCI AC World Index, which has 23 developed and 24 emerging market countries.

Ng noted that the manager of the Fidelity fund has the freedom to stray from the benchmark and may choose to invest in emerging markets. “But if that happens, it usually won’t be over 10% of the portfolio.”

The Fidelity fund had only 1.7% of its assets invested in emerging markets at the end of February, according to the fund factsheet. By comparison, the Investec product had 16% of its assets in emerging markets.

Top five geographic allocation (%)

Source: FE Analytics

The two products also differ in their investment methodologies, according to Ng.

The manager of the Fidelity fund, Jeremy Podger, looks for three kinds of stocks for the portfolio: Value stocks, stocks of companies that are in a middle of restructuring (such as M&A) and market leaders that have a reasonable expectation of strong long-term growth.

Ng noted that value stocks tend to have a heavy weighting in the Fidelity portfolio, typically 35%-60%.

“For value stocks, the manager aims to invest in them for up to three years and expects the stocks to have 50% upside over that period.”

By comparison, the Investec fund, which is managed by Mark Breeden, makes use of a four-factor screening model when choosing stocks.

The model looks at four factors: quality, earnings revisions, valuations and momentum.

Under quality, the model looks at at whether a company is delivering consistent value for shareholders, such as dividends or share price growth, according to Ng. Earnings revisions are also a key factor as an indicator for operating performance. Price momentum measures how the price of a stock is moving along with the market.

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