New Funds Designed for Investors Seeking Income; Offers Potential for Attractive Risk-Adjusted Return through Global Investments
Fidelity Investments®, a leading global asset management firm, today announced the launch of its first global equity income funds: Fidelity® Global Equity Income Fund -- available directly to investors -- and Fidelity Advisor® Global Equity Income Fund -- available through financial advisors.
Fidelity’s new equity income funds are designed to meet investors’ growing demand for equity income strategies. Each fund seeks reasonable income and, in pursuing this objective, will also consider the potential for capital appreciation. Fidelity Management & Research Company (FMRCo), the funds’ manager, invests each fund’s assets in securities issued anywhere in the world, including the U.S. FMRCo normally invests at least 80% of each fund’s assets in equity securities and normally invests primarily in income-producing securities. In managing each fund, FMRCo seeks to exceed the yield of the MSCI All Country World Index. Ramona Persaud, a nine-year Fidelity veteran, is the funds’ portfolio manager. She will work closely with investment professionals located in markets around the world to help uncover potentially attractive global equity investment opportunities.
“In the past decade, increased volatility in the equity markets and historically low U.S. bond yields have created new challenges for many investors,” said Brian B. Hogan, president of Fidelity’s Equity Group. “Against this backdrop, investor demand for income-producing equities has been growing. With our new global equity income funds, shareholders can benefit from Fidelity’s strong team of investment professionals to help deliver a global equity income strategy that meets the needs of equity income investors, while providing potential income generation from a broader source of dividend paying companies than in the U.S. alone.”
Fidelity also has published a new thought leadership report looking at global equity income investing: “The Merits of a Global Equity Income Approach.” The report analyzes the benefits of global equity income investing, how to identify an effective global equity income approach, and its possible investment implications.
Examining the Merits of a Global Equity Income Approach
Some of the reasons to consider a global approach to equity income include the potential for higher dividend yields, a larger pool of stocks to choose from, and the opportunities created by inefficient markets around the world.
Dividend Yields: The chart linked below shows the dividend yield of non-U.S. equities, which has been persistently higher than that of U.S. equities. This gap is even higher when a global equity income subset of global equities is compared with global and U.S. equities1.
Variety of Sectors and Regions: A global approach lends itself to discovering income in a broader variety of sources than focusing on the U.S. alone. Global equity income is sourced from virtually all regions and sectors worldwide, whereas U.S. equity income is sourced primarily from just three U.S. sectors: telecommunication services, utilities and consumer staples.
Global Markets are Inefficient: The U.S.’s share of global equity market capitalization is more than double its actual share of global economic output, which suggests that global markets are not very efficient, and thus create significant investment opportunities.
“A winning global equity income approach focuses on companies with competitive advantages that drive above-average returns and reliable cash flow generation, which, when combined with prudent capital allocation, greatly support current and future dividend payments,” said portfolio manager Persaud. “My investment approach uses a process that leverages Fidelity’s strong fundamental research, which involves a bottom-up assessment of a company’s potential for success in light of factors including its financial condition and outlook, strategy, management, industry position, and economic and market conditions.
“I place an emphasis on future free cash flow generation that can help evaluate the safety of current dividends as well as the potential to grow future dividends. Such approaches would tend to lead to stocks with better valuations, dividend yields, balance sheets and profitability,” continued Persaud.
Persaud joined Fidelity in 2003 as a research analyst and has covered a variety of industries in the cyclical and financial sectors, such as paper, packaging, radio frequency identification, housing and banking. She managed Select Construction and Housing Portfolio from 2004 until 2006, when she assumed responsibility for Select Banking Portfolio until 2008. From 2008 to 2011, she was based in London as an assistant portfolio manager on Fidelity Diversified International Fund. She began co-managing Fidelity Equity Income Fund in 2011. Prior to joining Fidelity, Persaud was an analyst for Goldman Sachs in New York from 1999 to 2001. She began her career in financial services as an analyst for Morgan Stanley in New York in 1997. Persaud earned her MBA at The Wharton School.
Fidelity Global Equity Income Fund and Fidelity Advisor Global Equity Income Fund compare their performance to the MSCI All Country World Index Net MA Tax Index. Fidelity has contractually agreed to cap expenses for Fidelity Global Equity Income Fund’s, subject to certain exceptions, at 1.20% for the retail share class. Fidelity has also agreed to the following contractual expense caps, subject to certain exceptions, for the Advisor share classes: Class A (FBLYX): 1.45%; Class C (FGTNX): 2.20%; Class T (FGABX): 1.70%; and Institutional Class (FBUSX): 1.20%.
With the addition of Fidelity Global Equity Income Fund and Fidelity Advisor Global Equity Income Fund, Fidelity now offers 10 equity income-oriented funds with more than $32 billion in assets under management.