How are the funds diversified among asset classes and sectors?

Transcription

1 Asset Manager Funds with Geoff Stein 8/15/11 Not approved by Legal VIDEO TITLE A conversation about Asset Manager Funds with Geoff Stein, Portfolio Manager Tell us a little about the Asset Manager Funds. Geoff Stein on-camera, identified with lower 3 rd AUDIO The Asset Manager Funds are a suite of what we call target risk funds that are designed to provide a well diversified portfolio to a variety of different investors based on targeted risk objectives. Investors, depending upon their risk tolerance, their time horizon, their other financial needs, can determine where on the spectrum of risks they want to be, and we have an asset manager fund to meet a wide variety of those different objectives. The fund is structured using two levels of professional Fidelity money management. As the lead portfolio manager on the asset manager funds, my role is to focus on asset allocation, both making sure that the mix of assets is appropriate, given the target risk objective, and also making shifts in asset allocation over the course of the market cycle to take advantage of opportunities that may arise in the marketplace. The second level of professional management is at the underlying security selection level within all the different equity and fixed income asset classes that we invest in. We utilize a number of different expert Fidelity fund managers, research analysts, sector leaders, who are experienced experts in their particular areas and whose job it is to find the very best securities, including those sub-portfolios, so that we can then allocate across them at the total level. What are the objectives of the funds? There are three main objectives at the Asset Manager Funds. First, we want to deliver the targeted investment objective for each benchmark for the Asset Manager Funds and make sure that we ve maintaining over the market cycle the right amount of risk for client objectives. Secondly, we want to provide consistent security selection value added from our Fidelity experts in all the

2 different asset classes that we invest in, which is generally a research based alpha that we re trying to generate from both equities and fixed income. And then third, as the asset allocation portfolio manager, I try to provide some value added as the opportunities arise over the market cycle to shift exposure between stocks and bonds on a timely basis. How are the funds diversified among asset classes and sectors? What are some of the factors in determining asset allocation positioning? Each Asset Manager Fund has neutral target allocation to several main asset classes: US equities, international equities, investment grade fixed income, and, for most of the funds, cash or short term investments. In addition, we invest in a variety of out of benchmark asset classes, which include things like high yield bonds, emerging market stocks, commodities, and others. Within sectors, we generally stay well diversified across all the industry sectors of the stock market, using a sector neutral approach where we re trying to focus on pure security selection within sectors as the main driver of out-performance. We use four primary factors in determining how we re going to be positioned in terms of asset allocation. First are a wide variety of macroeconomic indicators, things like economic growth, inflation, currencies, fiscal policy, monetary policy, all the big macro issues that tend to dominate the headlines. Secondly, given the wide variety of bottom up research being conducted here at Fidelity, we really try to leverage our analysts and portfolio managers within each of the asset classes for bottom up fundamental insights that they can provide, which can also be useful to our asset allocation process. Third, we look at valuations across asset classes -- stocks versus bonds, are they rich, are they cheap, how do earnings yields measure up to bond yields, both currently and relative to the historical averages, those kinds of indicators. And finally, we look at a variety of sentiment indicators, which give us kind of the pulse of investor psychology and help us determine whether investors are overreacting either in a bullish or overly bearish fashion to whatever the short term trends in the marketplace may be. How can investors potentially benefit from

3 owning an Asset Manager fund? (Legal Disclaimer / Onscreen in full and behind legal button in full) This video is provided for informational use only and should not be considered investment advice or an offer for a particular security. The views and opinions expressed by the speaker are their own as of the date of the recording, and do not necessarily represent the views of Fidelity Investments. Any such views are subject to change at any time based upon market or other conditions and Fidelity disclaims any responsibility to update such views. These views should not be relied on as investment advice, and because investment decisions for a Fidelity fund are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any Fidelity fund. Neither Fidelity nor the speaker can be held responsible for any direct or incidental loss incurred by applying any of the information offered. Please consult your tax or I think there are two primary benefits. First of all, asset allocation is a very difficult concept for many investors to be successful to carry out for themselves, and so in the Asset Manager Funds, we really provide all of the asset allocation know how using our disciplined approach, using all the resources that we have at our disposal, utilizing a risk control framework to stay on track with the right target risk objective over the course of the cycle and then also, either add risk or take risk off the table as the opportunities may dictate. Secondly, the Asset Manager Funds provide a single fund strategy for investors who may not want to have a complicated investment portfolio. We offer exposure to a wide variety of asset classes in a single fund, take care of all the rebalancing, and make sure the positioning is correct really at all points of the cycle which can take a lot of burden off the investor individually.

4 financial advisor for additional information concerning your specific situation. Diversification/Asset Allocation does not ensure a profit or guarantee against loss. Stock markets, especially foreign markets, are volatile and can decline significantly in response to adverse issuer, political, regulatory, market, or economic developments. In general the bond market is volatile, and fixed income securities carry interest rate risk. (As interest rates rise, bond prices usually fall, and vice versa. This effect is usually more pronounced for longer-term securities.) Any fixed income security sold or redeemed prior to maturity may be subject to loss. The fund is subject to asset allocation risk and the risks of the underlying funds in which it invests. Those risks include the volatility of the financial markets in the U.S. and abroad, risks associated with investing in particular countries or regions, or industries or groups of industries, and risks associated with investments in debt securities. If the fund s asset allocation strategy does not work as intended, the fund may not achieve its objective. The ability of an issuer of a debt security to repay principal prior to a security s maturity can cause greater price volatility if interest rates change. The commodities industry can be significantly affected by commodity prices, world events, import controls, worldwide competition, government regulations, and economic

5 conditions. Before investing, consider the funds' investment objectives, risks, charges, and expenses. Contact Fidelity for a prospectus or, if available, a summary prospectus containing this information. Read it carefully. Fidelity Brokerage Services LLC, Member NYSE, SIPC, 900 Salem Street Smithfield, RI FDC