Fidelity is to launch funds of third-party funds into the UK retail market in the fourth quarter...
Fidelity is to launch funds of third-party funds into the UK retail market in the fourth quarter of the year.
The two products, Growth and Income, will be managed by Richard Skelt and his team, which already runs funds of Fidelity funds under the Wealthbuilder banner.
Fidelity took the decision to enter the unfettered funds of funds market following a 12-month in-house pilot programme. During this period, it ran in-house and client money in unfettered portfolios.
Exposure to individual funds and providers will have set limits and Fidelity funds will face the same screening process as third-party portfolios. The sectors in which the two funds will reside is yet to be decided and will depend on their asset allocation at launch.
Stuart Holah, director of IFA business at Fidelity, said the pilot process was largely used to test whether the in-house portfolio modelling and analysis tools Skelt uses on existing asset allocation funds could cope with the expansion of his universe to include third-party funds.
Skelt already runs 15 fettered funds of funds, although many of these are mirrors and the investment process relies heavily on automated screening and portfolio optimisation processes.
Holah said: 'Over the past year, we have done a lot of development to enable us to take in external data feeds on third-party funds so we are not reliant on any one data source.'
All of this fund data will be fed into the group's quants screening process, which analyses portfolios' risk profiles, consistency of performance and predictability of returns in any given market conditions.
This typically excludes 85% of funds in Skelt's investable universe. Those that pass the screen will undergo qualitative research, including face-to-face interviews with the fund manager.
The fund selection process is then blended with the asset allocation process to devise the end portfolio and the weightings of individual holdings.
Skelt will have macroeconomic input from Fidelity's global asset allocation group, of which he is also the chairman. Although keen to stress investment themes are identified through bottom-up stock selection, Holah said Skelt will have access to the views of all of the group's regional chief investment officers when making inter-regional calls.
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