Fidelity Funds Global Dividend Fund

Transcription

1 Fidelity Funds Global Dividend Fund February 2017 Daniel Roberts Portfolio Manager Jane Davie Associate Investment Director For investment professional use only and not for general public distribution

2 Contents Five years since Fund launch Looking back on 2016 Assessing market expectations for 2017 Appendix

3 Five years since Fund launch

4 Fidelity Global Dividend Strategy Key product features An Unconstrained portfolio delivering a Dividend Based Total Return with an emphasis on Capital Preservation Significant cross cycle outperformance Real growth in the distribution Lower drawdown Source: Fidelity International, as at 30 November Fidelity Global Dividend Fund

5 Jan-12 Aug-12 Mar-13 Sep-13 Apr-14 Oct-14 May-15 Nov-15 Jun-16 Jan-17 Indexed Return Measuring our success The story so far Outcome #1 Performance since fund launch Fidelity 54.2% MSCI ACWI 52.4% Peer group 32.7% Fund (%) Index (%) Relative (%) Quartile Ranking 3 months th 1 year th 3 years nd Since launch st (3/44) Strong performance versus the sector since launch Source: Morningstar Direct, as at 31 January Basis: nav-nav, gross income reinvested in US dollars since launch 30 January Share class - FF Global Dividend A- MINCOME (G)-USD. Sector Average is the Morningstar GIF Offshore Global Equity Income Sector. 4 Fidelity Global Dividend Fund

6 Mar-12 Sep-12 Mar-13 Sep-13 Mar-14 Sep-14 Mar-15 Sep-15 Mar-16 Sep-16 Cents Measuring our success The story so far Real growth in distribution per unit (cents) Balanced portfolio total return since fund launch Yield compression Yield compression Dividends Dividends reinvested reinvested Dividend Dividend growth growth Source: Bloomberg, as at 31 December Fidelity Funds Global Dividend A-MINCOME USD distribution per unit. 5 Fidelity Global Dividend Fund

7 Up Capture Ratio (%) Measuring our success The story so far Low down capture Protecting capital in difficult markets % 18.6% 17.5% % % 9.8% 8.3% Fidelity Global Dividend A- MG-USD 5% 0% 5.4% 4.6% 0.7% 85-5% -5.1% 80 A low down capture value highlights the defensive qualities of the Fidelity Fund Down Capture Ratio (%) -10% Strong Markets (21 periods) MSCI >10% Moderate Markets (16 periods) 0% < MSCI < 10% FF Global Dividend A-MG-USD Falling Markets (11 periods) MSCI < 0% All periods (48 rolling 12 month periods in total) MSCI ACWI NR USD Source: Morningstar Direct, as at 31 December Basis: nav-nav, gross income reinvested in US dollars (annualised) to 31 December Performance / Risk vs. Offshore Global Equity Income Sector. Source: Fidelity International, Morningstar Direct, as at 31 December Basis: nav-nav, gross income reinvested in US dollars since launch 30 January Share class - FF Global Dividend A-MINCOME (G)-USD. Average rolling performance is calculated on a rolling 12 month periods since inception. Past performance is not a reliable indicator of future results. 6 Fidelity Global Dividend Fund

8 Analysing performance Number of contributors / detractors since launch > 20 bps detraction > 20 bps contribution 21 stocks 51 stocks 32 stocks < 20 bps detraction 21 stocks 125 stocks in total owned since launch < 20 bps contribution 15 of the current 57 stocks were in the fund at launch Source: Fidelity International, as at 31 December Fund launched 30 January Fidelity Global Dividend Fund

9 Looking back on 2016

10 31/12/ /01/ /02/ /03/ /04/ /05/ /06/ /07/ /08/ /09/ /10/ /11/ /12/2016 Relative return (%) Journey through 2016 Fidelity Funds Global Dividend Fund vs. MSCI All Countries World Index 6 4 Market : +15.0% Fund: +9.9% Market : -2.8% Fund: -1.1% 2 0 Market : -10.2% Fund: -5.4% Market : +4.4% Fund: -1.7% -2 Market : +2.9% Fund: +0.1% Capital protection amidst start of year sell off Commodity/EM fuelled rally Capital protection across Brexit event Sell off in bond proxies as yields inflect Post Trump: reflation + America First Source: Bloomberg, relative returns of Fidelity Global Dividend A-MG-USD and MSCI All Countries World Index NR USD, 30 December Fidelity Global Dividend Fund

11 H2 2016: From stagnation to reflation July 16 bond yields inflect Post Brexit rotation out of bond proxies Financials IT Materials Energy Industrials US 10 year Govt bond German 10 year Govt bond Consumer Disc. Nov 16 - Trump s election seen as pro growth MSCI AC World Index Telecoms Healthcare Infrastructure spending Deregulation Tax cuts Tariffs/ protectionism Real Estate Consumer Staples Utilities -10% 0% 10% 20% 30% Source: Bloomberg, as at 31 December Fidelity Global Dividend Fund

12 Nov-11 May-12 Nov-12 May-13 Nov-13 May-14 Nov-14 May-15 Nov-15 May-16 Nov-16 Total Return rebased to 100 Quality stocks indiscriminately marked down Wolters Kluwer, Netherlands Wolters has the quality characteristics we look for: Excellent revenue visibility (78% recurring) Strong cash conversion (>90%) Healthy balance sheet (1.8x net debt: EBITDA) High and stable margins, low capital intensity At its peak in the summer it traded on a PE multiple of 17x, a small discount to the broader market A 20% fall in the share price without any change in the fundamental outlook leaves it on a current rating of 14.5x, with a FCF yield of over 7% Ironically, 75% of its profit are derived from the US 0 Source: Fidelity International, as at 06 December DataStream. Reference in this document to specific securities should not be construed as a recommendation to buy or sell these securities, but is included for the purposes of illustration only. Investors should also note that the views expressed may no longer be current and may have already been acted upon by Fidelity International. 11 Fidelity Global Dividend Fund

13 May-90 Sep-90 Jan-91 May-91 Sep-91 Jan-92 May-92 Sep-92 Jan-93 May-93 Sep-93 Jan-94 May-94 Sep-94 Jan-95 May-95 Sep-95 Jan-96 May-96 Sep-96 Jan-97 May-97 Sep-97 Jan-98 May-98 Sep-98 Jan-99 May-99 Sep-99 Jan-00 May-00 Sep-00 Jan-01 May-01 Sep-01 Jan-02 May-02 Sep-02 Jan-03 May-03 Sep-03 Jan-04 May-04 Sep-04 Jan-05 May-05 Sep-05 Jan-06 May-06 Sep-06 Jan-07 May-07 Sep-07 Jan-08 May-08 Sep-08 Jan-09 May-09 Sep-09 Jan-10 May-10 Sep-10 Jan-11 May-11 Sep-11 Jan-12 May-12 Sep-12 Jan-13 May-13 Sep-13 Jan-14 May-14 Sep-14 Jan-15 May-15 Sep-15 Jan-16 May-16 Sep-16 4 month relative performance Sharp reversal in value vs. quality Value vs. quality rolling 4 month factor performance Source: SG Quantative Research/ Equity Quant, 11 th November Quality vs. Value performance (long only on each leg, 4 month rolling performance) 12 Fidelity Global Dividend Fund

14 PE Relative Index =100 Rebasing of defensive valuations Defensive sectors relative to MSCI DM Index, Total Return Prospective P/E of defensive sectors vs. MSCI DM Index Average Source: Minack Advisors as at 17 January Defensive sectors include health care, staples, utilities and telecommunications. 13 Fidelity Global Dividend Fund

15 Good stock selection failed to overcome sector positioning Stock & sector attribution over 2016 Real Estate Cons. Disc. Health Care Cons. Staples Utilities Health care & consumer staples Good stock selection amidst headwinds for these sectors Telecoms. Materials Industrials Energy Financials I.T. Cyclical sectors Little exposure to cyclical sectors and reflation beneficiaries was the main detractor Total -6% -4% -2% Sector allocation 0% 2% Stock selection 4% 6% Source: Fidelity International, as at 31 December Average fund weight in the 12-month period to 31 December Returns are in USD. 14 Fidelity Global Dividend Fund

16 Regional exposures were also a headwind... Illustrative impact of regional allocation Region Fund weight (%) Index weight (%) Relative weight (%) Index return (%) Relative return (%) Relative contribution from regional allocation (bps) Pacific basin ex Japan Europe ex UK North America Japan UK Emerging markets Total primary assets Source: Fidelity International, as at 31 December Fidelity Global Dividend Fund

17 ...but analysis by domicile overstates this effect Relative fund weights by domicile (%) Relative fund weights by economic exposure (%) N.America N.America Emerging Mkts Emerging Mkts Pacific Bas ex Japan Pacific Bas ex Japan Japan Japan UK UK Europe ex UK Europe ex UK Source: Fidelity International, as at 31 December FactSet. 16 Fidelity Global Dividend Fund

18 Sector positioning Changes over the last 12 months 11% 5% 7% 8% 16% Consumer Staples Exposure broadly unchanged In: Diageo, Japan Tobacco Health Care Reduced exposure from 21% to 14% Out: Sanofi, Cardinal Health, Medtronic 19% 15% 4% Out: Kraft Heinz, Reynolds American Increased: P&G Reduced: Kimberly Clark 14% Cons Discretionary Cons Staples Energy Financials Health Care Industrials Tech Telecoms Utilities Real Estate Cash Source: Fidelity International, as at 31 December Please note RELX and Wolters Kluwer have been reclassified as Industrials (previously Consumer Discretionary) as of end July Real Estate represents 1% allocation within the portfolio. 17 Fidelity Global Dividend Fund

19 Geographic positioning Changes over the last 12 months Regional weights by domicile (%) Japan Increased exposure from 6% to 10% EM 10% 4% 13% 3% Increased exposure from 1% to 3% US Reduced exposure from 41% to 37% 37% 31% Europe ex UK Australia UK Emerging Markets Europe ex UK US Japan Canada Others Cash Source: Fidelity International, as at 31 December FactSet. 18 Fidelity Global Dividend Fund

20 Oct-06 Oct-07 Oct-08 Oct-09 Oct-10 Oct-11 Oct-12 Oct-13 Oct-14 Oct-15 Oct-16 Finding opportunities in Japan Earnings growth and market re-rating: 2 years 10% 5% Net debt to total assets (%) % -5% -10% % % USA Japan World Asia Pac ex-japan GEM Europe Re-rating / De-rating Earnings Contribution USD Performance Japan US Source: Bank of America Merrill Lynch, December GEM stands for Global Emerging Markets. Graphs are for a 24-month period. Source: SG Cross Asset Research, Thomson Reuters Datastream 19 Fidelity Global Dividend Fund

21 Additions and disposals over the last 6 months Additions Disposals Source: Fidelity International as at 30 November New cyclicals added to the fund annotated with a 20 Fidelity Global Dividend Fund

22 Assessing market expectations for 2017

23 Testing the consensus 1 America First, #MAGA 2 Reflation 3 Cyclical earnings recovery 4 Rising interest rates Source: Fidelity International, as at 31 December Fidelity Global Dividend Fund

24 US equities have dominated global returns for 5 years S&P 500 & MSCI ex US total return series Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 Dec-12 Dec-13 Dec-14 Dec-15 Dec-16 (INDEX) S&P Total Return (INDEX) MSCI ACWI ex USA - Total Return Source: Fidelity International, as at 31 December DataStream. 23 Fidelity Global Dividend Fund

25 The America First trade has been rapidly priced in Regional Indices 3 month USD total returns S&P Russell % MSCI Japan +0.7 MSCI UK -4.0 MSCI Europe ex UK /09/ /10/ /11/ /12/ MSCI US Banks MSCI EM Asia -5.0 MSCI EM Latin America % 90 07/09/ /10/ /11/ /12/2016 Source: Fidelity International, as at 07 December DataStream. 24 Fidelity Global Dividend Fund

26 Should equity investors be celebrating the return of inflation? Historical relationship between inflation and equity valuations < to -6-6 to -5-5 to -4-4 to -3-3 to -2-2 to -1-1 to 0 0 to 1 1 to 2 2 to 3 3 to 4 4 to 5 5 to 6 6 to 7 7 to 8 8 to 9 9 to Axis on left: Inflation Rate "bins" (# Months) Axis on right: P/E Ratio (5 Year Normalized EPS) Monthly data since Source: Bloomberg, Haver Analytics, FactSet. FMRCo, Robert Schiller. 25 Fidelity Global Dividend Fund

27 How optimistic should equity investors be on potential earnings growth? US Profit Margins 10% 9% 8% 7% 6% Likely impact on profitability Strong US dollar Wage growth Protectionism Interest rates 5% 4% 3% 2% 1% Deregulation Lower taxes Fiscal stimulus 0% S&P Margin Source: Minack Advisors, as at 17 January Fidelity Global Dividend Fund

28 Rising interest rates vs. deflationary forces still at play Global debt growth 1 Ageing population 2 Growing wealth inequality 3 230% 220% Weighted average world gross debt to GDP, % 8% Proportion of over 65s in global population, % 85% 75% Share of global increase in wealth by decile, % 210% 55% 7% 45% 200% 35% 6% 25% 190% 15% 5% 180% % % Source 1: IMF Fiscal Monitor. Source 2: World bank. Source 3: Credit Suisse global wealth databook Fidelity Global Dividend Fund

29 Summary Pleased with progress against the outcomes targeted at Fund launch 5 years ago 2016 saw signs of an improving macro backdrop together with a shift from monetary to fiscal stimulus This sparked an aggressive rotation from quality into value, stagflation beneficiaries into reflation assets The stampede out of the so-called bond proxies has been indiscriminate and ignores the relative merits of these various defensive sectors Our quality bias is permanent not tactical - we believe it affords a significant advantage across a full market cycle The portfolio offers attractive (and improving) fundamental characteristics at a material valuation discount to the broader market Source: Fidelity International, as at 31 December Fidelity Global Dividend Fund

30 Appendix

31 Comparisons with Reagan are misplaced Reagan Trump US govt debt to GDP ratio 30% 77% Total US debt to GDP ratio 0.9x 3.6x Household debt to income 62% 130% Productivity growth 2.00% 0.25% Inflation 8.0% 1.7% S&P 500 median price-to-sales ratio 0.5x 2.2x Median age of baby boomers Mortgage rates 16.3% 4.0% 10yr UST bond yields 15.0% 2.4% Fed funds rate 18.0% 0.75% Trade barriers Falling Rising Source: Fidelity International, as at 31 December Fidelity Global Dividend Fund

32 Important information This information is for Investment Professionals only and should not be relied upon by private investors. It must not be reproduced or circulated without prior permission. Fidelity International refers to the group of companies which form the global investment management organisation that provides information on products and services in designated jurisdictions outside of North America. Fidelity International does not offer investment advice based on individual circumstances. Any service, security, investment, fund or product mentioned or outlined in this document may not be suitable for you and may not be available in your jurisdiction. It is your responsibility to ensure that any service, security, investment, fund or product outlined is available in your jurisdiction before any approach is made to Fidelity International. This document may not be reproduced or circulated without prior permission. Past performance is not a reliable indicator of future results. Unless otherwise stated all products are provided by Fidelity International, and all views expressed are those of Fidelity International.Top security holdings are those companies in which the largest percentages of the fund s total net assets are effectively invested. Positions in other funds - including ETFs (Exchange Traded Funds) can appear in this table, but index derivatives form part of an 'Other Index / Unclassified' category which will not appear. Reference in this document 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. Investors should also note that the views expressed may no longer be current and may have already been acted upon by Fidelity. The research and analysis used in this documentation is gathered by Fidelity for its use as an investment manager and may have already been acted upon for its own purposes. Fidelity, Fidelity International, the Fidelity International logo and F symbol are trademarks of FIL Limited. Fidelity Funds is an open-ended investment company established in Luxembourg with different classes of shares. Reference to FF before a fund name refers to Fidelity Funds. Fidelity only offers information on products and services and does not provide investment advice based on an individual's circumstances. The value of investments can go down as well as up and investors may not get back the amount invested. For funds that invest in overseas markets, changes in currency exchange rates may affect the value of an investment. Foreign exchange transactions may be effected on an arm's length basis by or through Fidelity companies from which a benefit may be derived by such companies. Past performance is not a reliable indicator of future results. This document may not be reproduced or circulated without prior permission. No statements or representations made in this document are legally binding on Fidelity or the recipient. The figures refer to simulated past performance and that past performance should not be used as a guide for future performance. Germany: Investments should be made on the basis of the current prospectus and/or the Key Investor Information Document (KIID), which is available along with the current annual and semi-annual reports free of charge from FIL Investment Services GmbH, Postfach , Frankfurt/Main or Issued by FIL Investment Services GmbH. Austria:Investments should be made on the basis of the current prospectus and KIID (key investor information document), which is available along with the current annual and semi-annual reports free of charge from our distributors, from our European Service Centre in Luxembourg, FIL (Luxembourg) S.A. 2a, rue Albert Borschette BP 2174 L-1021 Luxembourg as well as from the Austrian paying agent UniCredit Bank Austria AG, Vordere Zollamtsstrasse 13, A-1030 Vienna, or on Issued by: FIL (Luxembourg) S.A., authorised and supervised by the CSSF (Commission de Surveillance du Secteur Financier). Switzerland: We recommend you obtain detailed information before taking any investment decision. Investments should be made on the basis of the current prospectus and KIID (key investor information document), which is available along with the current annual and semi-annual reports free of charge from our distributors, from our European Service Centre in Luxembourg and from our legal representative and paying agent in Switzerland: BNP Paribas Securities Services, Paris, succursale de Zurich, Selnaustrasse 16, 8002 Zurich. Issued by FIL Investment Switzerland AG, authorised and regulated in Switzerland by the Swiss Financial Market Supervisory Authority. Italy:Please contact your financial advisor or the local branch of your bank in Italy. Spain:For the purposes of distribution in Spain, Fidelity Funds, Fidelity Funds II, Fidelity Active Strategy and Fidelity Alpha Funds SICAV are registered with the CNMV Register of Foreign Collective Investment Schemes under registration numbers 124, 317, 649 and 1298 respectively, where complete information is available from Fidelity Funds, Fidelity Funds II, Fidelity Active Strategy SICAV and Fidelity Alpha Funds SICAV s authorised distributors. The purchase of or subscription for shares in Fidelity Funds, Fidelity Funds II, Fidelity Active Strategy and Fidelity Alpha Funds SICAV shall be made on the basis of the Key Investor Information Document (KIID) that investors shall receive in advance. The Key Investor Information Document (KIID) is available free of charge and for inspection at the offices of locally authorised distributors as well as at the CNMV. Portugal: In Portugal, Fidelity Funds are registered with the CMVM and the legal documents can be obtained from locally authorised distributors. Nordic region: We recommend that you obtain detailed information before taking any investment decision. Investments should be made on the basis of the current prospectus and KIID (key investor information document), which is available along with the current annual and semi-annual reports free of charge from our distributors and our European Service Centre in Luxembourg, FIL (Luxembourg) S.A. 2a, rue Albert Borschette BP 2174 L-1021 Luxembourg. For investment professional use only and not for general public distribution EQINC Fidelity Global Dividend Fund

33 Important information The Netherlands: Investments should be made on the basis of the current prospectus and KIID (key investor information document), which is available along with the current annual and semi-annual reports free of charge from our distributors, from our European Service Centre in Luxembourg, FIL (Luxembourg) S.A. 2a, rue Albert Borschette BP 2174 L-1021 Luxembourg (tel ). In the Netherlands, documents are available from FIL (Luxembourg) S.A., Netherlands Branch (registered with the AFM), World Trade Centre, Tower H, 6th Floor, Zuidplein 52, 1077 XV Amsterdam (tel ). [Fidelity Funds/Fidelity Funds II] is authorised to offer participation rights in the Netherlands pursuant to article 2:66 (3) in conjunction with article 2:71 and 2:72 Financial Supervision Act. Belgium: We recommend that you obtain detailed information before taking any investment decision. Investments should be made on the basis of the current Key Investor Information Document (KIID) and prospectus, which are available along with the current annual and semi-annual reports free of charge from our distributors, from FIL (Luxembourg) S.A. and the financial service provider in Belgium, CACEIS België NV, with head office at Havenlaan 86C, B320, 1000 Brussels. Poland: This information is for Investment Professionals in the meaning of the Annex II to the Directive 2004/39/EC of the European Parliament and of the Council of 21 April 2004 on markets in financial instruments amending Council Directives 85/611/EEC and 93/6/EEC and Directive 2000/12/EC of the European Parliament and of the Council and repealing Council Directive 93/22/EEC only and should not be distributed to and relied upon by private investors. This material does not constitute a recommendation within the meaning of the Regulation of the Polish Minister of Finance Regarding Information Constituting Recommendations Concerning Financial Instruments or Issuers Thereof dated October 19, No statements or representations made in this document are legally binding on Fidelity or the recipient and not constitute an offer within the meaning of the Polish Civil Code Act of 23 April We recommend that you obtain detailed information before taking any investment decision. Investments should be made on the basis of the current prospectus, KIID (key investor information document) and Additional Information for Investors, which is available along with the current annual and semiannual reports free of charge from our distributors, from our European Service Centre in Luxembourg FIL (Luxembourg) S.A. 2a, rue Albert Borschette BP 2174 L-1021 Luxembourg and the representative office in Poland. Luxembourg: We recommend that you obtain detailed information before taking any investment decision. Investments should be made on the basis of the current prospectus and KIID (Key Investor Information Document), which are available along with the current annual and semi-annual reports free of charge from our distributors, the entities listed below or from our European Service Centre in Luxembourg, FIL (Luxembourg) S.A. 2a, rue Albert Borschette BP 2174 L-1021 Luxembourg. Issued by FIL Investments International (FCA registered number ) a firm authorised and regulated by the Financial Conduct Authority, FIL (Luxembourg) S.A., authorised and supervised by the CSSF (Commission de Surveillance du Secteur Financier) and FIL Investment Switzerland AG, authorised and supervised by the Swiss Financial Market Supervisory Authority FINMA. China: Institutional clients This material has been requested by you in China and has been prepared by Fidelity to you in China only for informational purposes to institutional investors. Fidelity is not authorised to manage or distribute investment funds or products in, or to provide investment management or advisory services to persons resident in, the mainland China. Qualified Domestic Institutional Investors (QDII) business. This material has been requested by you in China and has been prepared by Fidelity to you in China only for informational purposes in relation to Qualified Domestic Institutional Investors ("QDII"). Investors should refer to the relevant offering document for full details before investing in any investment funds mentioned herein and to seek professional advice through commercial bankers in the PRC under regulations by the CBRC, where appropriate. Fidelity is not authorised to manage or distribute investment funds or products in, or to provide investment management or advisory services to persons resident in, the mainland China. Hong Kong: Please refer to the relevant offering documents for further information including the risk factors. If Investment returns are not denominated in HKD/ USD, US/HK dollar-based investors are exposed to exchange rate fluctuations. The material is issued by FIL Investment Management (Hong Kong) Limited and it has not been reviewed by the Securities and Futures Commission ( SFC ). Korea: This document is for intermediaries internal use only (or institutional investor) and not for external distribution or fund promotion. All external distribution, amendment and variation of this information require prior written approval from Fidelity International. Fidelity International is not responsible for any errors or omissions relating to specific information provided by third parties. All views may have changed due to market movements or other circumstances thereafter. Please read the (simplified) prospectus thoroughly before you subscribe to any specific fund. Profit or loss that can be incurred in accordance to outcome of management and currency exchange fluctuation is reverted to investors. Past performance is no guarantee of future returns. The investment is not protected by Korea Deposit Insurance Corporation under Investor Protection Act. Investment involves risks. Funds investing in foreign markets are open to risks related to country s market, political and economic conditions which may cause loss on asset value. Fidelity, Fidelity International, the Fidelity International logo and F symbol are trademarks of FIL Limited. Singapore: FIL Investment Management (Singapore) Limited [ FIMSL ] (Co. Reg. No.: E) is the representative for the fund(s) offered in Singapore. Potential investors should read the prospectus, available from FIMSL, before investing in the fund(s). Taiwan: FIL Securities (Taiwan) Limited is the legal representative of Fidelity International in Taiwan For investment professional use only and not for general public distribution EQINC Fidelity Global Dividend Fund