Launched in september 2000 Fidelity's Financial services fund ranks 2nd with S&P for this year
The Fidelity Funds Financial Services Fund was launched in September 2000 and, at E97m, is the largest fund in Fidelity's sector fund range.
Paul Taylor is currently managing the fund. However, there are four lead analysts based in the US, Japan, Europe and Latin America. Each one takes it in turn managing the portfolio. Taylor has been managing the portfolio since May of this year.
The portfolio is benchmarked to the FTSE Global Financial index and follows the sub sectors in this. This includes speciality finance, real estate, life insurance, and banks.
The performance of the fund has gone down with the index. For 2002 the portfolio had a return of -4.13%.
However, the fund is ranked number two in the financial global sector for 2002, according to S&P. Over the past year global finance funds have failed to achieve positive returns.
A bottom-up stock picking strategy is used. There is a global approach to choosing stocks. Every two weeks a conference call is made to analysts to talk about what is going on in the markets. Besides the four lead analysts, there are an additional 20 analysts based around the globe who keep track on what is going on in the finance sector. Stocks are selected through constant communication between analysts.
Positions are chosen on a stock by stock basis. There is a five point rating system, where one is a strong buy and five is a strong sell.
Yvette Lloyd, senior fund strategist at Fidelity, says there are no hard or fast rules to choosing stocks. If a company is improving its business, has positive news flow and is priced below fair value, then it is put on the buy-list. Valuations are also compared historically with their global peers.
Potential holdings range from well-known multinational companies, to companies that operate purely in local markets, or those that offer a unique exposure to niche markets.
The fund's country positions usually do not diverge from the benchmark index by more than 5% and value is added through stock picking.
There is no systematic style bias towards growth or value stocks.
The portfolio has changed over the years. Themes are considered along with the bottom-up stock picking approach. The theme for the first quarter 2001 was to take a defensive approach. The portfolio avoided stocks associated with risks with bad loans in economic growth.
Top 10 holdings in January of 2001 consisted of Zurich Financial Services, Fannie Mae, Credit Suisse, ING Groep, BCO Santander Central Hispanic and Morgan Stanley Dean Witter. At that period the manager of the fund was Hong Kong-based Agus Tandiono.
In the second quarter of 2001, the portfolio was overweight brokerages and asset managers. One of the themes focused on structural reforms in Japan and the banking industry.
Lloyd said this was positive for companies. The theme for the first quarter in 2002 focused on an economic recovery in the US. Other themes included consolidation of the banking industry in Asia as well as financial restructuring in Japan.
In September 2002, top 10 holdings included Euronext, Cassa Di Risparmio Di Firenze, Bank of America, Deutsche Boerse, Wachovia and Anglo Irish Bank.
Themes for the third quarter included financial institutions that were not dependent on market transactions such as equity or derivative trading.
Other themes considered included structural growth in underdeveloped consumer credit markets, and consolidation within the industry.
The fund has about 100 holdings, and retains a bias towards larger companies.
The minimum investment is E3,000 and minimum top-up is E1,000.
The initial charge is 5.25% and annual management charge is 1.25%. The portfolio is Luxembourg domiciled.
about the manager: Paul taylor
Paul Taylor joined Fidelity Investments as a research analyst in 1997, after gaining an MSc from London Business School. He was promoted to fund manager of the Fidelity Funds Financial Services Fund in May 2002. Taylor is Australian and obtained two degrees from the University of Queensland before moving to the UK.
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