Richard Skelt, who joined Fidelity in 1991, took over management of the fund in 1998. As a fettered fund of funds it only invests in other Fidelity portfolios. Mr Skelt is responsible for allocating the fund’s assets among the company’s range of OEIC funds.
The domestic tilt of the fund is strong. Some 45% of the fund will always be invested in the UK with the remainder spread out across the world. Generally about 33% is invested in America, 12% in Europe, 7% in Japan and the rest in Asia and emerging markets. The manager does have some flexibility. He can move within five percentage points of the fund’s benchmark which is comprised of 40% FTSE All-Share and 60% MSCI World Index.
Mr Skelt’s decision about which regions he will have an over or underweight position in are driven by two factors. First, he assesses the outlook for the different parts of the world and then he takes a view on how that outlook will suit the skills of the portfolio managers available to him.
Currently there is a slight underweight position in America because of the general outlook for the country and also because managers are more upbeat in Europe than the US at the moment. Mr Skelt says that lately he is finding it difficult to take a strong view on asset allocation because the degree of correlation among the markets is very high.
The fund tends to invest in 12-20 underlying funds with an average of 15. Turnover for the fund is low – about 30% per year.
One of the strengths of this fund is its fee structure. There is no initial or exit charge for the fund. The annual management fee is only 0.50% but investors will be paying annual management fees for the underlying funds.
There are a couple of circumstances which can give the fund difficulty. Externally, a really sudden shock, such as the third quarter of 1998 which saw the collapse of the LTCM hedge fund and the emerging markets debt crisis, will make investment tough for the manager. These sorts of events will affect almost all areas of the portfolio. Internally, when portfolios become more similar then the advantages of diversification weaken and the fund is more exposed to certain themes. This can happen if a number of funds change managers around the same time.
