Fidelity Sustainable Asia Eq A-Dis-SGD |
Morningstar's Take
|22/02/2024by Claire Liang
| We continue to consider Fidelity Sustainable Asia Equity as one of the best Asia equity offerings, thanks to its topnotch lead manager, well-resourced analyst team, and a time-tested investment process. We reiterate the strategy's People and Process ratings at High. Lead manager Dhananjay Phadnis is an experienced and savvy Asian equity investor. He brings 23 years of investment experience and has led this strategy's UK and Luxemburg-domiciled vehicles since November 2013 and March 2015, respectively. He has built strong track records throughout his career and has proved able to add value via stock selection over time. As part of Fidelity's recent overhaul of its assistant portfolio manager program, Flora Wang's title has been changed to portfolio advisor from assistant portfolio manager since Jan. 31, 2024. Her role on the strategy related to ESG and company engagement matters remains unchanged, and she continues to develop her fundamental analysis skills with the aim of becoming the strategy's comanager. We will monitor her progress, but we see this as having a limited impact on the strategy, and most of our conviction continues to hinge on Phadnis, who has always been the sole decision-maker here. The supporting 55-member Asia Pacific ex-Japan analyst team has been relatively stable in recent years and only lost two analysts in 2023. That said, given the recent reversal of many experienced analysts' assistant portfolio manager appointments, which directs them to refocus purely on their equity research responsibilities, we are keeping an eye on the team's talent retention and ongoing stability. This strategy's Luxemburg and UK-domiciled vehicles formally adopted a sustainability mandate in February and April 2021, respectively, which we consider a formalization of the approach that Phadnis has already been employing. Phadnis has long favored quality firms with strong management teams and sustainable value creation, and the end portfolio of 50-70 names typically consists of fundamentally sound businesses trading below their intrinsic values and out-of-favor stocks with turnaround catalysts. He has stayed true to his quality-growth bias even during the prolonged style headwinds between 2021 and 2023 when growth stocks faced severe setbacks and lagged their value counterparts by a large extent. His quality emphasis and valuation discipline helped buoy the strategy’s relative performance in the down markets of 2021 and 2022. That said, 2023 turned out to be a more difficult market environment to navigate, where many of Phadnis' long-favored quality-growth names in China and Hong Kong, such as AIA, China Mengniu Dairy, and Anta Sports, dragged on performance amid China's low consumer confidence. Nonetheless, Phadnis’s record suggests that he has strong stock-picking abilities in these two markets, which have been key contributors to the strategy’s long-term performance. The strategy's long-term performance remained robust over Phadnis' tenure. We maintain our conviction in Phadnis' investment savvy and his tried-and-tested investment approach and believe this strategy is poised to deliver over the cycle. |
The strategy is more appealing than its recent performance suggests. To find out how Morningstar rates a fund click here.
| Morningstar Pillars | |
| People | High |
| Parent | Above Average |
| Process | High |
Morningstar Medalist RatingMorningstar assigns the Medalist Rating to funds that are qualitatively and quantitatively assessed through manager research and algorithmic processes. The assessment turns on three key “pillars” – People, Process, and Parent – that yield an estimate of how well a fund will perform before fees but after adjusting for risk.
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