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Important information This magazine is for investment professionals only and should not be relied upon by private investors. Past performance is not a reliable indicator of future returns. Investors should note that the views expressed may no longer be current and may have already been acted upon. Reference to specific securities should not be construed as a recommendation to buy or sell these securities and is included for the purposes of illustration only. The value of investments and the income from them can go down as well as up and investors may not get back the amount invested. Investments in overseas markets, changes in currency exchange rates may affect the value of an investment. The value of bonds is influenced by movements in interest rates and bond yields. If interest rates and so bond yields rise, bond prices tend to fall, and vice versa. The price of bonds with a longer lifetime until maturity is generally more sensitive to interest rate movements than those with a shorter lifetime to maturity. The risk of default is based on the issuer's ability to make interest payments and to repay the loan at maturity. Default risk may therefore vary between different government issuers as well as between different corporate issuers. Sub-investment grade bonds are considered riskier bonds. They have an increased risk of default which could affect both income and the capital value of the fund investing in them. Fidelity fixed income funds may use financial derivative instruments for investment purposes, which may expose the fund to a higher degree of risk and can cause investments to experience larger than average price fluctuations. Assets and resources as at 30 June 2018 - data is unaudited. Investments should be made on the basis of the current prospectus, which is available along with the Key Investor Information Document, current annual and semi-annual reports free of charge from professionals.fidelity.co.uk or on request by calling 0800 368 1732. Issued by FIL Pensions Management and Financial Administration Services Limited, authorised and regulated by the Financial Conduct Authority. Fidelity, Fidelity International, the Fidelity International logo and F symbol are trademarks of FIL Limited. UKM1018/22675/SSO/NAO/0918
‘Big news, same story’
The end of the year will bring the curtain down on the career of another industry veteran. Fidelity International’s Ian Spreadbury will retire after an illustrious career spanning almost 40 years. While the departure of such an important figure is undoubtedly big news, the transition has been meticulously planned for years so it should be business as usual for Fidelity's fixed income team come 1 January. Sajiv Vaid joined the company from Royal London Asset Management in 2015 to work alongside Spreadbury on the UK investment grade bond funds. The team working alongside Spreadbury on the Fidelity Strategic Bond Fund has also been bolstered in recent years. As Spreadbury’s co-managers take the lead in January and begin a new chapter in the team’s history, they have at their disposal some of the most extensive fixed income resources on the buy-side, with some 69 investment professionals on the bond floor. It is a far cry from the team of three when Ian joined in 1995 and launched the Fidelity MoneyBuilder Income Fund. Assets under management have come a long way too. The Fidelity fixed income team now manages £65bn on behalf of retail and institutional clients worldwide. No one would underestimate the important role that Spreadbury has played in the build-out of Fidelity’s fixed income capability and the growth in assets, but he should be content to retire knowing his legacy is in safe hands with such an experienced team. Clients should expect Fidelity’s UK fixed income fund range to continue to deliver the same high quality outcome to which they have been accustomed.
A new chapter for the Fidelity fixed income team
As we’ve gone through the year, things have certainly played out differently to the consensus view in January
As veteran fixed income investor Ian Spreadbury prepares for his retirement at the end of the year, Sajiv Vaid, his current co-manager and successor as lead manager on the popular Fidelity MoneyBuilder Income Fund braces for a more challenging market environment
In recent months, that research has led the fund to trim exposure to BBB rated bonds in order to reduce credit sensitivity. Vaid argues that this is going to be important if markets do become more volatile as we head into the winter months. “Protecting against downside risks has to be topmost in our minds now. High yield has outperformed investment grade this year, doing much better than expected. A glut of new issuance has contributed to the relative underperformance of investment grade, creating a bit of indigestion in the market. We have now started to see some deals being pulled due to lack of demand. I’d take that as a sign of some stabilisation that could see the outlook improve for investment grade.” On the subject of outlooks, as he looks to the future, does Vaid think he can continue Spreadbury’s impressive performance record? “We now have almost 70 investment professionals in the team. When you buy the Fidelity MoneyBuilder Income Fund, you’re not just making an investment with me and Kris - in the same way you haven’t just been buying Ian’s ideas in the past - you are benefiting from all those years of collective experience and insight across the team. When we’re discussing new ideas with the analysts and traders, what I hear gives me a lot of confidence that we have this market well covered and understand what our clients want. I hope our investors see that too.”
Vaid is in agreement that there is quite a fragile mind-set in the market nowadays. It’s little wonder that he is focused on downside protection in a more uncertain backdrop for corporate bonds, a view that has been the hallmark of Spreadbury and the MoneyBuilder Income Fund in recent years. Is that because he thinks central banks have gone too far, too fast? Addressing the Bank of England’s tighter monetary policy, he observes: “The August rate rise was not unexpected but in my mind it wasn’t necessary. Yes, GDP has been revised marginally higher, with growth closer to potential. The consistently strong labour market also keeps expectations of higher nominal wages alive, with recent public sector pay deals probably playing a role here too. But you can’t escape that the risks remain - Brexit being the most obvious one. The impact of higher rates on consumer and borrower sentiment may still be more substantial than the Bank thinks. “We have seen a remorseless build-up of headwinds for growth and credit markets. Not only does Brexit heighten the risks, so too does the rise of more populist governments in Spain and Italy who may challenge the structure of Europe further. Add that to a strong dollar - which has obviously hit emerging markets particularly hard - and growing protectionism and it’s far from a supportive backdrop for tighter monetary policy. All this comes on top of the structural problems of still too much global debt and rising wealth inequality.” The net effect is that Fidelity’s lower-for-longer stance hasn’t really changed. The team believes that any further increase will be gradual at best and likely accompanied by a dovish tone. With that ‘lower-for-longer’ position in mind, the fund has added duration in recent months, although it continues to be underweight its comparative index. At one point this year, the fund was 1.5 years short, one of the shortest positions since the financial crisis. That has now come in and it is currently less than 0.5 years short. Spreadbury has never been one to take large duration positions. Could that change under the stewardship of Vaid? “We do occasionally make macro bets on interest rates and currencies but these directional trades are often difficult to get right because the market is pretty efficient. Our investors don’t want that volatility in the fund,” he explains. “The focus today is the same as always - to generate alpha from a bottom-up approach that relies on the smart ideas that come from our research and trading teams.”
‘Protecting against downside risks has to be topmost in our minds now’
It has been over three years since Sajiv Vaid joined the team at Fidelity. Previously an investment grade corporate bond manager at Royal London Asset Management, he was hired as part of the long-term succession plan for Ian Spreadbury. The pair have worked side-by-side as co-managers since then so how does it feel to have a new co-manager in Kris Atkinson take his side and to take over as lead manager from such a stalwart of the industry? “Ian’s reputation was one of the things that attracted me to Fidelity three years ago,” says Vaid. “But what impressed me most when we met was that he doesn’t have any ego. He simply wants to manage money as best as he can for his clients - and that is exactly why I do this job too. So from the first time we met, we knew we shared a similar philosophy and approach and that has made it really easy for us to work together. “We’ve been co-managers on the fund since 2015 so I already know the portfolio inside out and have been an integral part of the decision-making process for so long now that I really don’t feel like I’m ‘taking over’ - what you see today is as much my portfolio as Ian’s and I’m confident that clients won’t see any difference in the new year. “I’m looking forward to Kris joining me on the fund. To date, he’s worked on our global investment grade portfolios and prior to this he was a senior credit analyst. This experience will be invaluable and complement our bottom-up credit selection. As the sterling market is now so global in nature, I think he will also bring some interesting and insightful perspectives to how we build the portfolio.” Although Vaid believes there should be no difference seen in the portfolio, markets look increasingly challenging as the era of easy money comes to an end with tighter monetary and fiscal policies. Does he think we are we at a tipping point that might finally end the bull market for bonds? “As we’ve gone through the year, things have certainly played out differently to the consensus view in January. The view then was of continued low volatility and spread compression while it was thought that government bonds would come under pressure from a synchronised pick-up in global growth. “What we have seen has been much more of a mixed bag. US 10-year Treasuries have been on a rollercoaster ride and have recently breached the psychologically significant 3% barrier. “In corporate bond markets, spread compression has given way to widening. In fact, one of our traders pointed out the other day that it feels like there has been a shift in the market mentality. It’s no longer ‘buy the dip’ - it’s more like ‘sell into strength’.”
LOWER FOR LONGER YET: Vaid believes any future rate increases will be gradual at best
One of the negative currents churning below the surface is the burgeoning spread investors require to own telecom company debt. Indubitably, anticipation of jumbo supply plays a role here, but so too do deteriorating revenue growth prospects, increasing pressure on enterprise value multiples across a sector laden with ‘melting ice cubes’. Further complicating the picture, telecom debt is already one of the largest sectors by market capitalisation and is, by definition, widely held. There are selected reasons for creditors to be constructive on certain stories in the sector, whether that is ample cash flows, new technologies or sufficient capital allocation flexibility making debt service and reduction manageable. High yield markets are semi-efficient and this constantly evolving new issuance environment, combined with complicated covenants and legal structures at the company level, provides ample opportunity for active investors to extract alpha through bottom-up security selection. Peter Khan is lead manager of the Fidelity Global High Yield Fund and will become co-manager of the Fidelity Extra Income Fund in January 2019.
So far this year, lower-rated credits, which tend to exhibit positive correlation to economic growth and inflation, have strongly outperformed their higher quality, more interest rate sensitive cohorts. This is a natural reaction to a strong economy, gently increasing government bond yields and healthy earnings generation. Despite a steady stream of investor outflows since the second half of 2017, high yield returns have been bolstered by one of the slowest issuance years for some time. Illustrative of this is the negative US$55bn of net issuance in US high yield this year - roughly 4.5% of the market! This source of strength masks a growing number of underlying weaknesses, including increasingly negative creditor documentation and creatively generated financial projections. The Thomson Reuters deal (FINRSK) jumps to mind as an example of pushing the boundaries on weak documentation. With an excess of liquidity relative to allocation opportunities (namely opportunities which are positively correlated to growth), investors have begrudgingly overlooked stretched metrics for newly leveraged entities, carefully finding their way through the capital markets pipeline. Danger perennially lurks beneath the surface in high yield when market participants exhibit a combination of complacency and resignation. The supportive technical backdrop, in the form of negative net supply, came under threat when the long drawn out AT&T - Time Warner acquisition concluded in June. The favourable ruling does not produce immediate high yield issuance from the entity in question, but the precedent it sets has positive implications for Sprint - T Mobile USA deal approval and should put the market on notice for a jumbo financing package in the not too distant future. Sprint is the largest US high yield telecoms issuer by some way, at over 20% of the sector. We have also seen Comcast’s bid for Sky approved in September. The flurry of corporate activity is not too surprising for telecom companies struggling to spark revenue and earnings growth in the face of disruptive challenges to their existing business models. Not to mention that mass market consumers in developed markets continue to face disappointing marginal disposable income growth and are therefore resistant to price increases for goods and services. Indeed, the sales pitch to investors for the debt financing these deals will draw heavily upon hopes that industry consolidation can improve pricing power and enable investment in new technologies that may command an additional premium. Many investors will buy into this vision but will clearly also demand a substantial new issue premium for promised yet unguaranteed execution of these plans.
High yield investors are on notice for a jumbo financing package off the back of a flurry of M&A activity, particularly in the telecoms space. Peter Khan discusses the outlook for one the largest and most widely-held high yield sectors
Waiting for the jumbo to land
Source: Bloomberg, Fidelity International, August 2018. Chart shows spread between the ICE BofA Merrill Lynch US High Yield Index and the ICE BofA Merrill Lynch US High Yield Telecommunications Index
A WIDER PREMIUM OF TELECOMS
'The global economy is firmly in the late part of the cycle'
With yields low and unprecedented uncertainty, it’s fair to say it hasn’t been the easiest market for bond investors. Tim Foster and Claudio Ferrarese, co-managers of the Fidelity Strategic Bond Fund, reflect on the need for greater flexibility to deal with these challenges
Tim Foster and Claudio Ferrarese have been co-managers of the Fidelity Strategic Bond Fund for the last 18 months. They come from quite different backgrounds - Foster has built his track record managing inflation-linked bonds and money market funds while Ferrarese has been more associated with a number of Fidelity’s total return strategies. They view these different experiences as an invaluable asset when managing such a broad mandate. Having access to large team of analysts means there are always a wealth of ideas to explore. A decade may have passed since Lehman Brothers filed for bankruptcy protection, but recent market jitters provided a timely reminder that volatility still exists in financial markets. The question for many is whether the uptick in volatility is going to last, or if it could it return to the more muted levels seen in 2017? “It is difficult to pinpoint when this prolonged economic expansion will come to an end. However, with valuations (and volatility) having tested new highs (and lows) in the past 12 months, we are extremely cautious on the outlook for riskier or less liquid assets,” says Foster. “We think that the global economy is firmly in the late part of the economic cycle, with credit fundamentals deteriorating as companies use ever more share buybacks and mergers to drive equity returns, funded by borrowing in bond markets. “The flattening US Treasury yield curve - as the Federal Reserve push ahead with hiking interest rates - has been a good indicator for recessions in the past although there’s fierce debate as to whether this time will be different. The increase in US government spending announced last year will certainly prolong the US expansion for a couple of years, but we think this won’t be able to overcome the late cycle fundamentals in the end.” Foster goes on to explain what this means for the team’s duration strategy: “As things stand, we’re likely to nudge duration higher from here, with a preference for US dollar duration given the late cycle dynamic. Treasuries have a higher beta than gilts or bunds and we feel they offer the best hedge for a risk-off move, so should outperform in a risk-off rally. But we are aware the technical picture is very uncertain, so the challenge is to balance the risk of further gaps higher in yield with caution about the possibility of a reversal.”
Ferrarese adds that the caution also stems to the credit component of the fund. “As always, it’s important to keep a good balance between duration and credit risk when thinking about moving into a more defensive position. We currently run a very defensive asset allocation - and similar from a liquidity perspective - given our recent increase in government bond exposure,” he explains. “While we are still modestly positive on credit risk overall, the fund’s allocation is skewed to investment grade corporate bonds over high yield. All else being equal, our aim in the coming months would be to keep trimming our remaining high yield and emerging market debt exposures into any further strength. We also have very little exposure to less liquid parts of the capital structure, such as subordinated bank debt.” While striking an overall cautious tone, the team are keen to point out that the fund’s flexible remit still allows them to take advantage of selective short-term opportunities. For example, they added some risk following Italy’s recent political debacle, recently adding around 1% to a position in China. “That is the beauty of a fund like this,” points out Ferrarese. “It carries a broader toolkit and is backed by global analyst and trading teams that can help us to be active in these ‘tactical trades’. For example, we have been working closely with the analysts on a sector-by-sector basis to reduce the ‘beta’ element of the portfolio.” “With risk asset valuations looking increasingly stretched, we think the focus needs to be more on selective alpha opportunities and downside protection, rather than pursuing the highest yielding or higher beta assets,” adds Foster. “We’re looking for ideas that are largely uncorrelated to other active positions we have on, but the key to it is ensure they are sized appropriately from a risk perspective.” Looking ahead to the future, the duo is reassuringly upbeat regarding their belief in the team’s process and philosophy: “What has always struck us when speaking to our investors is that none of us know for sure what might happen next in markets but you tend to know what you are going to get from the Fidelity Strategic Bond Fund,” says Ferrarese. “We are naturally quite defensive for a global unconstrained bond fund. For us this means selective participation in new deals, a reduction in overall credit exposure and maintaining a well-diversified portfolio with exposure to a range of global rates and credit markets. “We ultimately seek to generate attractive risk-adjusted returns over the course of the cycle for our investors, while striking an appropriate balance between the core pillars of bond investing: income, low volatility, and diversification from equities. We are comfortable accepting a degree of underperformance in the short-term, for a better risk-adjusted performance in the medium to long-term – and the long-term performance track record of the fund since it was launched back in 2005 is testament to our global investment process.”
FLATTENING YIELD CURVES: Foster (left) and Ferrarese are likely to increase duration given the late cycle dynamic
FIDELITY STRATEGIC BOND FUND SUMMARY - OCT 2018
The Fidelity Strategic Bond Fund invests globally across fixed income asset classes and is not constrained by a benchmark, providing a high level of flexibility to generate attractive risk-adjusted returns over the course of the cycle that should deliver on the three pillars of bond investing: steady income, low volatility, and diversification to equities.
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For a couple of years now I have been cautioning anyone who would listen that corporate balance sheets look distinctly “late-cycle”. This debt-fuelled anxiety has become increasingly fretful as the number of flashing warning signs has increased, but up until recently few people seemed to be paying any attention. Ten years on from the demise of Lehman Brothers we see that: • The longest US equity bull market of all time • For the most part, interest rates still at emergency levels • cUS$10trn of negatively yielding bonds • The worst 10-year return from commodities and cash since the Great Depression Most concerning for me is the excess in corporate leverage built up in the global system. Until recently, I have struggled to identify a catalyst that would actually lead this to have an impact on returns but today I see a plethora of potential fire starters that could usher in a more nervous approach to risk-taking. The first and most obvious catalyst is the now synchronous withdrawal of central bank liquidity. The Federal Reserve raised rates again in September and the market continues to price in quarterly hikes into 2019. The ECB is also expected to halt asset purchases and the market is beginning to price in hikes for 2019. When that happens, markets may at last begin to realise again that fundamentals do matter. The unintended consequences of QE, namely asset bubbles, are one-by-one beginning to pop. The mind-boggling valuations of Bitcoin was ripe for bursting but of greater systemic importance, the “Warren Buffet Ratio” - stock market cap to GNP - at 148% before the recent correction, was back to the level seen in the year 2000 when it was described as a “once in seven decades” overvaluation. Secondly, I am constantly surprised by the complacency that meets each incremental salvo in the ongoing trade war. New tariffs are met in short order by a further commitment to escalate - neither side is incentivised to back down. Yet the market seems quite relaxed about the risks this poses to global growth and inflation - China’s response to passively allow further currency depreciation will have unintended consequences as it creates a ripple effect through the global economy.
Ahead of joining Sajiv Vaid as co-manager of the Fidelity MoneyBuilder Income and Fidelity Short Dated Corporate Bond Fund, portfolio manager Kris Atkinson wonders when other market participants might wake up to the increasing risks
What have we learned in the last 10 years?
I am therefore taking little comfort from supposedly strong earnings growth. This is a backward-looking series, it compares something that happened a quarter ago to something that happened more than a year ago and so should already be priced in. For example, earnings data was just as strong as we entered the credit cycles of 2008 and 2001. In my opinion, the profit outlook has become more negative for risk assets, and is beginning to be reflected in asset prices. Global EPS growth has trended down since February, EBITDA margins for the S&P have been contracting throughout 2018 and leading indicators of profits - such as Korean exports - have been in a downtrend, recently turning negative. Recession prediction models, often curve based models are indicating elevated recession risks. In the case of the New York Fed, its indicator is at its highest since the crisis. Fidelity’s Leading Indicator has been indicating below trend and decelerating growth for the past seven months. None of these are enough on their own but taken together…caveat emptor! So we continue to be cautiously positioned across our range of investment grade bond funds. We believe this should bring some protection to clients who share our belief that there will be heightened volatility when markets begin to more fully price in these risks.
COMPLACENCY CONCERNS: The market seems care free about risks the US-China trade war poses to global growth
Working with one of the world’s largest privately-owned investment managers, Fidelity’s clients benefit from experts who understand what you need. Their global fixed income investment team comprises a total of 69 portfolio managers, research professionals and traders. Through the integrated capabilities of their specialised teams, you can make the most of the multitude of fixed income opportunities out there. The specialist team structure brings more efficient coverage and a better use of skills. All investment professionals are fully integrated into the investment process and contribute to portfolio strategy - with the portfolio managers held accountable for the final decision. By including a range of investment ideas, the Fidelity team diversify risk and ensure that no single decision has an undue impact on portfolio performance. Their research-focused MASTR investment process is designed to ensure the best investment ideas are identified and incorporated efficiently within portfolios. Fixed income research is undertaken alongside equities - credit analysts contribute to a single global research platform used by both equity and fixed income teams and company meetings are often shared. This gains insight into the entire capital structure of companies and allows fundamental views to be expressed in different ways depending on where the best opportunities lie.
Fidelity Fixed Income: MASTR investors
THE MASTR INVESTMENT PROCESS
The starting point is an assessment of market conditions, identifying key factors that may influence the strategy. Here, the focus is on areas such as macroeconomics, politics, market sentiment and technical factors.
An allocation to specific risk buckets is determined, with specified parameters and constraints in which to generate additional return.
A bottom-up approach, leveraging the recommendations from Fidelity’s large research teams, identifies and selects the best ideas to populate the risk buckets.
A dedicated team of specialist traders ensures best execution, with all trades subject to pre-trade clearance.
Risk is controlled throughout the portfolio construction process, but additional oversight applies a multi-dimensional approach to monitoring measuring and assessing risk.
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In an environment of heightened economic volatility and uncertainty, we believe we offer more than a range of smart fixed income solutions. We offer a trusted partnership to help you and your clients navigate uncertainty with confidence
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Meet the team
Sajiv Vaid
Sajiv joined Fidelity from Royal London Asset Management in 2015. He has been co-manager of the Fidelity MoneyBuilder Income and Extra Income Funds since joining and becomes lead manager in January 2019. He has been lead manager of the Fidelity Short Dated Corporate Bond Fund since its launch in November 2016. Sajiv began his career at Gerrard Group in 1994, where he was a trainee bond fund manager, before joining Fuji Investments as a bond fund manager in 1997. In 2001, he joined Royal London and managed their flagship retail and institutional corporate funds until his move to Fidelity.
Kris Atkinson
Kris joined Fidelity in 2000. He becomes co-manager of the Fidelity MoneyBuilder Income and Fidelity Short Dated Corporate Bond Funds in January 2019. Having started out as a research associate, Kris became a credit analyst in 2001 and was promoted to a senior credit analyst position in 2010. During this time he covered a variety of sectors across investment grade, high yield and emerging markets, including European utilities, consumer / retail, pharmaceutical, global energy and basic materials. He became a portfolio manager in 2013. Prior to joining Fidelity, Kris worked for Lexecon, a consultancy subsequently acquired by Charles River Associates.
Peter Khan
Peter joined Fidelity as a trader in 2000 and was promoted to Head of Trading in 2003. He became a portfolio manager in 2009 and has run the Fidelity Global High Yield Fund since it was launched in 2012. He also manages other global income strategies and becomes co-manager of the Fidelity Extra Income Fund in January 2019. Prior to Fidelity, he worked at Bayerische Hypo-und-Vereinsbank as Head of Trading on the London Eurobond desk.
Tim Foster
Tim joined Fidelity as a quantitative analyst in 2003. He became a portfolio manager of our money market strategies in 2007 and has since widened his portfolio management responsibility beyond short dated portfolios to now include corporate and inflation linked bonds. He has been co-manager of the Fidelity Strategic Bond Fund since April 2017.
Claudio Ferrarese
Claudio joined Fidelity in 2006 and has been co-manager of the Fidelity Strategic Bond Fund since April 2017. His first role at Fidelity was as part of the quantitative research team, where his main responsibility was portfolio construction and trade idea generation in credit, rates, FX, structured credit and credit options. He became an assistant portfolio manager in 2015, working primarily on our total return and absolute return strategies. Prior to joining Fidelity, he worked as a structured finance analyst at Capitalia Banking Group, Rome.
James Durance
James joined Fidelity in 2013 as a senior credit analyst covering the automotive and transportation sectors, before joining the portfolio management team in 2015. He started his career in 1998 at BSMG Worldwide, before moving to a role at IHS Global Insight, where he worked in market research in the automotive and telecoms industries. After his MBA at IESE in Spain, James worked at Morgan Stanley as a credit analyst from 2006 - 2013, covering investment grade and high yield credit and working across the bonds, loans and derivative asset classes.
The last word
Ian Spreadbury has been witness to some of the most turbulent market events in history - numerous financial crises, the dot-com collapse and the rise of the Chinese economic powerhouse, the introduction of the euro and the shock of the Brexit referendum result - the list goes on. He has often come through these events with a strong performance story to tell. Why does he think he fared so well? Would he do things differently with hindsight? “I love the unpredictability and dynamism of markets and I’m fascinated by the way they work, and what drives yields. When I started it was a real learning curve, and in many ways it still is, as markets and their drivers continually change and evolve. “I remember when we left the ERM in 1992. The moves in both sterling and gilt yields really brought home that gilts can be more volatile than you think. Situations like this teach you how to think about risk. “Another important lesson is to expect the unexpected. For example, when Confederation Life (a major AAA-rated Canadian insurance company that went into liquidation in 1994) defaulted, it had a major impact on the market. An event like this, which seemed totally impossible before it occurred, can really challenge your convictions. “That taught me two important lessons. Firstly – credit ratings agencies are not infallible. Perhaps that is more commonly known following the global financial crisis, but at the time it was a revelation. Secondly, while fixed income investors get paid a spread to take on risk, it is asymmetric and the importance of diversification cannot be overstated in order to mitigate that downside risk.” Spreadbury’s focus on meticulous risk management is undoubtedly one of the reasons why his funds have tended to fare well during bouts of volatility. How much has that philosophy been informed by his actuarial background? “My actuarial background has undoubtedly had an influence on how I think about risk but I also never forget that I manage real money for real people. I see that as a privilege and I owe it to my clients to be responsible with their investments. “You need to know why you bought something and not be afraid to cut it if you get it wrong. I’m never going to be 100% right so that’s why I’ve always tried to be well diversified and to constantly review big positions.” Does he think he’s going to miss life on the investment floor? “I’m 63 years old. I have loved every day as a fund manager but it’s time I moved on to do other things, including spending more time with my family. “When I started at Fidelity, the fixed income team consisted of me, a trader and an assistant manager. Between us, we had to cover everything. Today, it’s a very different business with just shy of 70 investment professionals. We work as a team and everyone has a role to play - I’ve just been one of the more visible members. “I’m proud to have played my part as the team has grown and developed but its right that the baton is passed to a new generation. I’ve worked with them all for a number of years and have every confidence that they will continue to serve Fidelity’s investors well.” Ian Spreadbury has been a portfolio manager at Fidelity International since 1995. He retires at the end of 2018. We wish him all the best for the future.
Fund managers may come and go but few have built up the following of Ian Spreadbury. He’s been a stalwart of the industry and at the forefront of Fidelity’s UK fixed income business for over two decades. As he prepares to retire, he considers the lessons learned over a long and successful investment career
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