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Fund in Focus: Fidelity Asian Values

Morningstar senior fund analyst David Holder explains the recent upgrade of Fidelity Asian Values to Bronze following a change in manager and mandate

Emma Wall 6 January, 2017 | 11:43AM

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Emma Wall: Hello and welcome to Morningstar. I'm Emma Wall and joining me today to discuss Fidelity Asian Values is Senior Fund Analyst, David Holder.

Hi, David.

David Holder: Hello, Emma.

Wall: So, closed-end fund in focus today, Fidelity Asian Values, and a trust that has quite an interesting history because it was something completely different, wasn't it?

Holder: Indeed. It's a good example of how the Board have added value here. They've been proactive. They've seek to differentiative from its peers. Previously, it was a large-cap growth-focused type of investment trust in Asia. They've identified that a small-cap value-orientated manager is able to add value in that market. And so, they've looked through available options and in April 2015, they appointed Nitin Bajaj of Fidelity to manage the trust's assets.

Wall: And he does have experience running this type of portfolio, doesn't he, although not specifically in a closed-end fund structure?

Holder: That's correct. He has managed the Fidelity funds Asian Smaller Companies SICAV since September 2013. He is a veteran of Fidelity from 2003. He has had analyst responsibilities. He has also been the co-fund manager on the Fidelity Global Special Situations Fund and he has also managed Indian mandates as well.

So, very much, he has got a classic Fidelity background in terms of sort of analysts training and moving up through the fund management side of things. So, indeed, he has got a very good level of experience for running this type of mandate.

Wall: And quite rightly, when the mandate was changed so aggressively, Morningstar fund analysts put this fund as a Neutral rating to sort of wait and see how the manager performed. But now, it's been upgraded, hasn't it?

Holder: Yes, we upgraded in November last year. Basically, our level of conviction has increased over time since we've had opportunity to speak with Nitin. He has an extremely impressive individual, a very good communicator, a very strong investment process and we like a lot about what we hear from him.

Wall: And could you tell us a little bit more about that process then?

Holder: The process is value-orientated. So, he is seeking a level of margin of safety in the companies that he is investing into. He is looking for companies that are trading below their intrinsic value. He is looking for very good company management. He is also looking to try and understand the industry in the company and how it operates.

And so, he tends to stay away, if you like, from things like information technology and financials and sticking very much to more of the sort of straightforward bread and butter type of companies that are found in the region, consumer defensives, et cetera. There's a vast number of companies he can choose from, around 17,000. So, the opportunity set is enormous.

Wall: We should just caveat with the fact that obviously within emerging markets and smaller companies and value-orientated portfolio like this or a fund like this should only ever be a niche player in a more diversified portfolio for retail investor and they should be aware that it can be volatile at times?

Holder: It can be volatile at times. For all those reasons that you mentioned, there is also the added element of gearing within the portfolio, although that's fairly modest at the moment. But indeed, I think this is a good diversifier for the more experienced investor and for those with a broader portfolio generally.

Wall: David, thank you very much.

Holder: Thank you.

Wall: This is Emma Wall for Morningstar. Thank you for watching.

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Securities Mentioned in Article
Security NamePriceChange (%)Morningstar
Rating
Fidelity Asian Values Ord395.13 GBX0.41
About Author Emma Wall

Emma Wall  is Senior Editor for Morningstar.co.uk