Fidelity sees fixed income opportunities beyond the UK

With the universe of fixed income funds in Europe twice as large as that of the UK, Fidelity’s Multi-Manager Team urges investors to look beyond the UK to benefit from added choice, more opportunity and gain access to specialised funds.

Looking beyond the UK to incorporate exposure to pan-European fixed income, and combining this with a multi-manager approach offers significant benefits:

Increased choice: Potential investment pool more than doubles from 309 to 717 fixed income funds;

Specialism: Multi-manager funds are able to benefit from gaining exposure to funds that aren’t usually available to UK retail investors. For example, Fidelity’s MultiManager Distribution Fund invests in funds that are only usually accessible to institutional investors - Pall Mall High Yield Europe Plus Fund and ECM Danube Sub-Fund;

Investment Opportunity: Companies issuing debt can go to any fixed income market in the world, not just the UK. Therefore, including pan-European Fixed Income Funds in the portfolio increases the number of investment opportunities available.

Simon Mungall, Portfolio Manager of Fidelity MultiManager Distribution Fund said:“It’s important to note that the UK is a small part of the overall fixed income market, and that there are many drivers of fixed income returns common throughout the world. So when we put together the fixed income portion of our MultiManager Distribution Fund, we looked at things in a slightly different way to that of a standard, traditional distribution fund.

Mungall continues:“Our approach means more choice, more investment opportunity and access to specialist funds that UK investors in traditional distribution funds would not usually be able to benefit from.”

Fidelity’s MultiManager Distribution Fund invests in underlying fixed interest products which offer positive alpha and funds that offer an exposure to pan European credit. As at the 30th Nov the fixed interest portfolio holdings were:

Goldman Sachs LIBOR Plus II Portfolio
Cazenove Strategic Bond Fund
Pall Mall High Yield Europe Plus Fund
ECM Danube Sub-Fund

The Goldman Sachs Global Currency Portfolio has also been added to the mix to give another global dimension to bolstering the yield of the fund. Currency risk is minimal as the funds are hedged back to sterling. By investing in such a diverse asset mix the Fund is expected to give a yield of approx 4%.

The Fidelity MultiManager Distribution Fund is managed by Fidelity’s highly-regarded multi-manager team, led by Richard Skelt. The Fund aims to invest 40% in UK Equity Income funds (for capital growth and yield), 40% in Bond funds (for capital preservation and yield) and 20% in Global Property Securities funds (for yield).

The annual management fee is 1% and, as with Fidelity’s core multi-manager products, there is a 2% ceiling on total annual expenses. The initial charge is 3.5%. The fund is eligible for inclusion in an ISA, self-invested personal pension (SIPP) and the FundsNetworkTM Onshore Investment Bond later this year. Minimum contributions start at £50 per month.