Fidelity heads down under for latest fund

Australia is the largest single country weighting held in the new Fidelity Asian Aggressive fund launched last week. The portfolio has about 30% of its assets invested in the country, whereas China and India each have weightings of just 5% to 6%.

As first reported in Fund Strategy (January 7, 2008), the fund is a more aggressive version of the group’s existing £1.1 billion South East Asia fund. However, the new fund, which is managed by David Urquhart, has a broader remit, which includes the ability to invest in Australia.

Maria Abbonizio, investment director at Fidelity, says that Australia is often overlooked when it comes to investing in Asia. However, she notes that it makes up a lot of the earnings in the overall market.

One sector of particular interest in the fund, she says, is coal and iron ore. “Owing to China’s cold winter, China has stopped exporting so much coal,” says Abbonizio. “This means the other coal producers are benefiting, with Australia and Indonesia stepping in.”

There is also a large infrastructure story in Australia, adds Abbonizio. This is because there has been a lot of under-investment over the past few years in both the country’s ports and railways.

The fund, which is benchmarked against the MSCI All Countries Asia Pacific ex Japan Index, typically invests in 55 to 85 holdings. Next to Australia, the two largest country weightings are in Korea (17%) and Malaysia (8%).

Abbonizio says: “The key is that this fund provides exposure across different markets. It’s a high-conviction portfolio and David makes use of Fidelity’s 40 analysts in the region.”

Urquhart has previous experience of investing in these markets, having run the Fidelity Funds (FF) Australia, Singapore and Korea funds. He also still heads the Fidelity Institutional Asia ex-Japan Opportunities fund, which has a similar remit to Asian Aggressive.

Despite its Aggressive title, Abbonizio adds that turnover in the pilot portfolio was only about 50% a year, with Urquhart typically investing in stocks with a two-year time horizon.

The fund also invests across market caps, although Abbonizio notes that there is a slight bias to mid and large caps.