Fidelity Asian Values, got a new manager in the shape of Nitin Bajaj, a new benchmark – the MSCI All Countries Asia ex Japan Index, will use treasury shares for the first time, has cut its fees and is proposing changes to its investment policy. The proposed changes would extend the ways in which derivatives can be used by the Company, and clarify and make certain consequential amendments to the investment policy.
Over the year to the end of July 2015, the fund’s net asset value return was 4% and the return to shareholders 6.2%, both well ahead of their old benchmark, MSCI AC Far east ex Japan Index which returned 0.3%.
Nitin’s manager’s report says over the 12 month period (he took over 1 April, before that it was John Lo), IT sector holdings such as e-commerce company Alibaba Group and electronic supply chain manager Redington India were leading contributors within the IT sector. The position in Alibaba surged following a much anticipated listing, and Redington India also gained in view of optimism about likely growth in demand in anticipation of stronger growth in the Indian economy. John booked profits in Alibaba in November 2014 after it reached his target price. Nitin reduced the position in Redington India in April and sold it completely in July due to increasing competition.
In the discretionary space, the position in Korean travel agent Hana Tour Service proved beneficial as it gained market share due to its strong brand and channel operations. However, Nitin offloaded the holding in April due to valuation concerns.
Within staples, a position in Australia-based confectionery firm Yowie Group, which Nitin initiated in April, proved rewarding. The company is rolling out its brand of chocolates in the US, where it is shielded from intense competition as it is the property rights owner of the unique brand and has exclusive access to the US market. The position remains among the Company’s top holdings.
Relative returns from the healthcare sector were primarily driven by the holding in Religare Health Trust, which owns hospitals in India. Nitin added to the holding in April given its strong brand, structural growth opportunity in India and attractive dividend yield.
Elsewhere, an overweight stance in China-based insurance provider Ping An Insurance and brokerage services firm Citic Securities buoyed returns. Both these stocks gained against the backdrop of a series of financial sector reforms announced by the government. More specifically, Citic Securities was a direct beneficiary of the Shanghai Hong Kong Stock Connect program which led to a surge in trading volumes. Ping An was sold in April as Nitin switched into better quality, value names with simpler business models such as Power Grid Corporation and Religare Health Trust. Citic Securities was also offloaded in May as the stock reached his valuation target.
On a less positive note, the holding in Slater & Gordon was the main detractor from performance. The Share price fell amid concerns about an acquisition of the professional services division of UK-listed legal firm Quindell. The
Australian regulator was also reported to be looking into the processes of Slater & Gordon’s auditors. A large portion of the holding was sold in the interest of prudence to mitigate the unfavourable impact from the news flow related to the stock. Elsewhere, a holding in specialty machinery producer Sarine Technologies declined after missing earnings expectations, whilst the holding in oil & gas exploration firm Rex International hampered returns as a fall in oil prices weighed growth expectations. Both these positions were closed in April to finance the purchase of better quality small cap value names.
FAS : All change at Fidelity Asian Values