On 26 April, Fidelity International changed the name and objective of the Fidelity Emerging Asia Fund to become the Fidelity Sustainable Asia Equity Fund.
We look at the portfolio from five angles to see what makes it different to its peers and why investors should consider Asia when it comes to investing sustainably.
Presenting the Fidelity Sustainable Asia Equity Fund
Dhananjay Phadnis, portfolio manager of the Fidelity Sustainable Asia Equity Fund, provides a snapshot of the five key attributes of the fund, and discusses what the new launch means for the approach and stock selection in the portfolio.
Asset class
Process
Differentiator
Team
Track record
FOR PROFESSIONAL INVESTORS ONLY
IMPORTANT INFORMATION
“The opportunity set is there and if you have the right team and investment approach, there is an exciting value creation opportunity for investors,” says Phadnis.
NEXT
With a focus on high-quality growth opportunities in Asia, the Fidelity Sustainable Asia Equity Fund, managed by Dhananjay Phadnis, has at least 70% of its portfolio invested in Asian (ex Japan) higher-rated ESG companies.*
While Asia remains at a very early stage of sustainable investing, Phadnis says companies are excited about the journey ahead of them and that he is seeing a lot of willingness on their part to improve for the better.
*Minimum ESG rating of BB by MSCI. However, the portfolio managers will aim to achieve a higher threshold, targeting at least 70% of the portfolio invested in companies rated BBB and above by MSCI. If unrated by MSCI, rated C or above by Fidelity Sustainability Ratings. Our ratings score issuers on an A-E scale and trajectory forecast based on fundamental bottom-up research and materiality assessment using criteria specific to the industry of each company.
70%
in Asian higher-rated ESG companies
At least
Given this focus on engagement, Phadnis says only through an active approach can the fund have an influence on companies.
Investing in 50-70 stocks, Phadnis says the mission of the fund is to generate alpha by investing in high-quality sustainability-driven companies.
He says: “I have always believed that companies with strong corporate practices and focus on sustainable growth have a higher likelihood of generating superior returns in the long term and can provide robust downside protection.”
Phadnis says the investment approach is built on two core pillars: integration and engagement. While the underlying investment process will remain the same as the previous Fidelity Emerging Asia Fund, there is now an enhanced focus on ESG criteria and deeper levels of engagement with individual companies to help influence more sustainable outcomes.
stocks
50-70
Investing in
In addition to the change in name of the fund, its benchmark has also been changed from the MSCI Emerging Markets Asia Index to the MSCI AC Asia ex Japan Index. Phadnis says the constituents of this index better represent the types of companies the fund will engage in, and therefore be a better comparator for performance purposes.
Fidelity takes inputs from
Global In-house specialists*
Unlike some other sustainable funds that use third-party ESG ratings, Fidelity Sustainable Asia Equity uses Fidelity International’s own proprietary sustainability ratings service, which takes inputs across 176 equity and fixed income analysts globally* within the group.
Launched in June 2019, as at December 2020, the Fidelity Sustainable Ratings covered a universe of about 4,600 issuers in equity and fixed income.
“You need to understand where companies are going and incorporate this into your understanding. By doing this and as well as not having to outsource our engagement process, that is a key advantage,” says Phadnis.
176
*Source: Fidelity International, as at Mar 2021.
Portfolio manager has
of investment experience
With 19 years of investment experience, Phadnis took over managing the Fidelity Emerging Asia Fund in November 2013. He has also managed the Luxembourg-domiciled Fidelity Asia Focus Fund since March 2015.
Having joined Fidelity in November 2019, Flora Wang has been appointed assistant manager on the fund. With 11 years of ESG experience, Wang was previously at BlackRock for five years, where she held the role of head of investment stewardship, Greater China.
Wang’s focus will be on company engagement and analysis of sustainability factors.
19 YRS
In managing the Fidelity Sustainable Asia Equity Fund, Phadnis and Wang have access to a team of 61 research analysts in Asia Pacific (ex Japan)* who search for stock ideas across the region.
“Flora has a strong ESG background, and the combination of her expertise plus the Fidelity resources we already have is a significant enhancement for the department,” says Phadnis.
HOME
The previous fund, Fidelity Emerging Asia Fund, which Phadnis managed since 2013, was launched in 2011, and since inception is first-quartile in the IA Asia Pacific ex Japan sector.
Phadnis says: “All our hope and effort is is that we can continue to deliver good performance for investors through the significant investment we are driving into the fund.”
5-year discrete performance (%)
Past performance is not a guide to the future.
Source: Fidelity International, 31 March 2021. Basis: bid-bid with income reinvested in GBP for the fund’s primary share class according to the IA. Index: MSCI Emerging Asia Index. Holdings can vary from those in the index quoted. For this reason, the comparison index is used for reference only. Index is the MSCI Emerging Asia Index. Performance Basis: bid-bid with income reinvested, in GBP, net of fees for Fidelity Emerging Asia W ACC Share class. (Performance does not include an initial charge).
1
quartile over tenure*
ST
of competitors beaten over tenure*
94%
*Fidelity Emerging Asia Fund managed by Dhananjay Phadnis from November 2013.
This information is for investment professionals only and should not be relied upon by private investors. The value of investments (and the income from them) can go down as well as up and you may not get back the amount invested. 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. Changes in currency exchange rates may affect the value of an investment in overseas markets. Investments in emerging markets can be more volatile than other more developed markets. The Fidelity Sustainable Asia Equity Fund has the potential of having high volatility either due to its composition or portfolio management techniques. It can also use financial derivative instruments for investment purposes, which may expose it to a higher degree of risk and can cause investments to experience larger than average price fluctuations. Reference to specific securities should not be interpreted as a recommendation to buy or sell these securities, but is included for the purposes of illustration only. A focus on securities of companies which maintain strong environmental, social and governance (“ESG”) credentials may result in a return that could, at times, compare less favourably to similar products without such focus. No representation nor warranty is made with respect to the fairness, accuracy or completeness of such credentials. The status of a security’s ESG credentials can change over time. 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 on request by calling 0800 368 1732. Issued by 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. UKM0421/34304/SSO/NA
Disclaimer