Fidelity European Values: Concentrating Its Portfolio And Hedging Its Bets
Edison | Apr 03, 2018 08:17AM ET
Fidelity European Values (LON:FEV) aims to achieve long-term capital and income growth from a portfolio of primarily continental European equities. Although well diversified, the portfolio became more concentrated during 2017, as the manager sold stocks that had performed well and reinvested in existing holdings. While retaining a positive net market gearing, the manager added 10 single-stock short positions to the portfolio in August 2017, reflecting the view that valuations had become stretched in many parts of the market. A lower 0.75% management fee on assets over £400m takes effect from April 2018, while a reallocation of fees and expenses from revenue to capital will positively affect the level of future dividend payouts.
Investment strategy: Consistent, fundamental focus
The manager selects stocks using a bottom-up approach, focusing on a company’s ability to grow dividends over a three- to five-year time horizon. FEV’s portfolio typically contains 50-60 holdings, broadly diversified by sector and country. Contracts for difference (CFDs) are used to add gearing and take short positions, with gearing permitted up to 30% of net assets. Exposure to a basket of single-stock short positions is hedged by an index future to maintain positive net market gearing. To reflect the manager’s focus on dividend income as well as capital growth, the board has proposed a revision of FEV’s stated investment objective.
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