HEAD-TO-HEAD: Fidelity vs M&G

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Both the Fidelity and M&G funds invest in global emerging market equities and have the MSCI Emerging Market Index as their benchmark. However, both funds are very different in terms of their styles and investment approach.

The Fidelity fund has a bias toward growth-oriented companies, while the M&G fund has a value-tilt, according to Tsymbaluk.

The Fidelity fund’s team looks for companies with high return on equity (ROE) and other growth metrics, as well as those that provide attractive dividend yields. The lead manager, Nick Price, will pick 50-70 names from stock ideas from three regional co-managers, who themselves have around 50 ideas each.

“For Fidelity, the manager is willing to pay up for growth, which is reflected in the higher than average price-to-book and price-to-earnings metrics compared to its peers. It also has higher ROE compared to peers.”

Source: Morningstar

Turning to the M&G product, the manager, Matthew Vaight, looks for companies that are improving their return on capital.

He categorises companies into four buckets: external change, which include long-term themes and shifts in the global economy that may affect companies; internal changes, which include changes in company management and restructurings; asset growth, which entails growth driven by investment in research and development and innovation; and quality, which are companies that have high sustainable returns.

“All those buckets have a value tilt. But what is most important is the internal change bucket, which has the largest exposure to value and has companies that are usually underappreciated by the market,” Tsymbaluk said.

The M&G fund’s value tilt is reflected in its lower-than-average price-to-earnings and price-to-book ratios when compared to its peers, she added.

The differences in the funds’ investment processes reflect the dissimilar sector allocations. For example, the Fidelity fund has more exposure to some of the more expensive areas in the market, such as consumer staples and information technology, particularly internet companies.

For the M&G fund, it is more biased toward the cheaper areas of the market, such as energy and industrials. Tsymbaluk noted that although the M&G fund has huge exposure to technology, it is in the cheaper sub-sectors, such as Korean hardware and software names, as opposed to the expensive internet names.

Source: Morningstar

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