Fidelity embarks on active ETF strategy

International fund manager Fidelity has implemented a strategy to introduce a series of active exchange-traded funds (ETF) into the market with the express view of assisting SMSF investors achieve better portfolio diversification.

“We see it as a great way for our clients very simply to diversify their holdings. We know that there has been a concentration, certainly among the self-managed super [investors], in bank shares and Australian equities in particular and in the market research that we’ve done we have been asked for help to diversify those holdings,” Fidelity International Australian managing director Alva Devoy said.

The strategy has commenced with the launch of the Fidelity Active ETF Global Emerging Markets to be run by portfolio manager Alex Duffy.

The offering will mirror the investment strategy of the Fidelity Global Emerging Markets Fund based on a concentrated portfolio of between 30 and 50 stocks across a range of emerging market companies.

According to Duffy, the investment philosophy is focused on companies with strong corporate governance, strong balance sheet structures and good-quality return profiles with values that provide a degree of safety.

“Why choose global emerging markets as the first cab off the rank for Fidelity? It is for that diversification play. It is [about] helping clients to diversify, but because it’s on exchange they’re going to be able to see their holdings in the stockbroker account side by side with the units that they own in a Fidelity fund,” Devoy noted.

“[This] is not a thing we focus a lot on, but it’s hugely beneficial to clients when they can aggregate all of their holdings in one place.”

She said the manager was confident of attracting interest from SMSFs even though these investors may potentially focus on developed markets for their diversification into international equities.

“If we were to look at global equities that today is 50 per cent weighted to the US and I think there is an acknowledgement that, certainly in the US, we have enjoyed fantastic growth for the last 10 years and fantastic returns,” Devoy explained.

“So on a relative basis, when you’ve got a US heavyweight index to go into, there is a hesitancy there for putting new money to work in a global equities fund.

“We would never recommend a 100 per cent investment in emerging markets, but if you were wanting to use part of your investment budget to access growth, then emerging markets that are actively managed that have a view on reducing that volatility for you will be an attractive proposition.”

The new ETF is expected to be open for investment on 29 October.


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