HEAD-TO-HEAD: Fidelity vs Pinebridge

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Performance

The Fidelity Greater China Fund has significantly outperformed its Pinebridge rival over three- and five years, and has only marginally underperformed over one-year, for which period both funds made negative returns due to the China stock market rout in the second half of 2018.

“The Fidelity fund has strong long-term performance, achieving excess returns over its sector peers and also ahead of its [MSCI Golden Dragon] benchmark. Its focus on growth stocks, especially technology-related companies, has helped drive those positive returns,” said Ng.

The fund has achieved a five-year cumulative return of 51.82%, compared with a 20.36% sector average return and 39.82% by the index.

Its three year cumulative return of 49.21% closely tracks (but underperforms by 1.5%) its index, and is over 16 percentage points better than the Pinebridge performance.

“Fidelity has also outperformed Pinebridge every calendar year since 2014, except in 2018 when its growth bias hurt returns,” said Ng.

Although the Fidelity fund is more volatile (17.15% annualised) than the Pinebridge fund (16.60%), its excess returns more than compensate for those greater fluctuations.

It has earned an alpha of 3.85 over three years, compared with 0.11 by Pinebridge, and its Sharpe ratio (a measure of risk-adjusted returns) is also superior at 0.61 compared with 0.37.

According to Ng, the Pinebridge fund’s performance suffered in 2017’s market upturn because of underweight positions in the consumer discretionary and property sectors.

The managers also made a poor call during 2015’s market downturn by being underweight defensive sectors such as utilities and telecommunications.

“Despite both funds adopting a bottom-up stock selection process, getting the right sector allocation has probably been the main driver of their performance,” said Ng.

Discrete annual performance % (US dollars)

 Source: FE Analytics

*Equity – Greater China

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