Manager Research

We have recently completed our review of the Fidelity Emerging Markets Fund and have downgraded its rating from Tier 1 to Tier 2. While we continue to view the team as strong and well-resourced, several changes in the portfolio management team in recent years have reduced confidence in the fund’s succession plan to Nick Price, who has managed the fund since 2009. This has heightened concerns about key person risk within the strategy to the extent that we can no longer justify retaining a Tier 1 rating. However, we still consider the fund a viable investment option for global emerging markets exposure by assigning a Tier 2 rating.

Context

The Fidelity Emerging Markets Fund aims to invest with an overarching philosophy of a bottom-up stock selection process that is supported by rigorous research, while the portfolio is constructed with a bias towards high-quality stocks at attractive prices. Since Nick Price took over the management of this fund in 2009, net-of-fees returns have beaten the benchmark by approximately 1% per annum. There is evidence of investment skill over long periods that instils confidence in the manager and the investment process.

Summary of Changes to the Team

Chris Tennant is the latest addition to the team, becoming co-manager of the fund in June 2024. He replaces Amit Goel, who moved off the strategy to focus on managing Fidelity Sustainable Emerging Markets. Unlike Goel, Tennant has limited portfolio management experience in a long only strategy and is relatively untested as a portfolio manager. This increases the dependence on Price as the experienced decision-maker for the fund. While we take comfort in Price continuing to manage the fund, it does heighten the level of reliance on him as the manager and introduces increased key man risk into our evaluation of the fund’s rating.

Our Rating View

Overall, this is a well-established investment process that has been consistently implemented over a 15-year period. There is a good level of fundamental stock research carried out, with the process making use of the extensive in-house research capability. Although there have been changes to team, the key decision maker Price, continues to lead the fund, which allows us to retain conviction in the fund as an investment option for emerging markets, while acknowledging key man risk as a concern.