Fidelity Global
Equities Fund

Look at global investing
differently.

Show me

We’re serious about long-term growth

Our focus is to identify long-term winners. See for yourself how the Fidelity Global Equities Fund, a portfolio of 80-120 of our best global ideas, has performed.

Graph value of $10,000 invested since inception vs the benchmark

    Fidelity Global Equities Fund
    0
    Benchmark MSCI Country World Index Net
    0

    Chart as at: 31/07/17

    Past performance is not a reliable indicator of future performance. The return of capital is not guaranteed. The net returns include any reinvested distributions and are after fees and expenses. No allowance has been made for tax or the buy/sell spread.


    Fund inception: 15 April 1998

    Insights

    Asset class outlooks: Cautious optimism…

    • Bull market still intact but late stage
    • Global growth moderating, but earnings outlook is positive
    • Leadership has swung back to quality growth stocks
    • The risk of policy mistakes remains elevated
    • Key drivers of bond markets: central bank policy, inflation and outlook for China

    Bull markets are born on pessimism and die on euphoria. By that yardstick, the current bull market - already one of the longest on record - has further to go. Many investors remain cautious and uncommitted; this has been one of the most miserable and loathed bull markets in memory. Yet, this feature helps to explain its remarkable longevity. Bull markets end only after the last buyers are flushed out, but there is abundant cash on the side-lines. We are not seeing the kind of ‘cult of equity’ or FOMO (fear of missing out) behaviour evident in previous market tops. Market progress is being underpinned by better earnings growth.

    We see three key themes for the third quarter of 2017:

    1. The bull market is intact but beginning to look stretched

    The bull market is still running, but nervousness over when and how it might end is consuming investors. And not without justification; we have travelled a long way in the current cycle. The 99 months since March 2009 mark the second-longest bull market since the Second World War. Many of the issues holding back equities have been addressed and markets have risen considerably. While we are not yet at the top, investors should start preparing for it happening in the next 12-18 months.

    Taking the measure of bull markets

    Source: Fidelity International, Thomson Reuters, 16 June 2017. Based on the S&P500 Index.

    2. Earnings growth is underpinning equity markets for now - Europe most attractive

    Earnings growth is supporting equity markets. We are not seeing valuations becoming detached from earnings to the worrying extent evident in previous market tops like the 2001 dot-com bubble. Europe, in particular, is benefiting from a catch-up effect in both economic and earnings growth now that political worries have faded. European earnings revisions have turned firmly positive - in fact, they haven’t been this positive in five years; earnings growth and revenue estimates are now outpacing the US.

    Earnings growth to support markets

    Source: Fidelity Earnings Forecasts, Fidelity Insight, Fidelity International, June 2017.

    3. China and inflation are the key factors to monitor

    US inflation has been unusually weak for three consecutive months - but it didn’t stop the Federal Reserve hiking rates at their June meeting. Chair Janet Yellen believes the inflation weakness will prove temporary. Sustained weakness would raise questions about the state of the US economy, so US growth and inflation data will be keenly anticipated and analysed.

    Meanwhile, China is trying to cool certain areas of its economy and improve financial transparency. We are seeing a tightening of regulations and financial conditions in the banking sector and credit growth has slowed. We see GDP growth slowing to c.6.5%, but investors will want confirmation that any kind of harder landing has been avoided.

    Fidelity's Investment Outlook: At a glance

    Equities
    Overall The bull market remains intact but it is now in its last phase. Fortunately, earnings growth is underpinning share prices and there are few signs of irrational exuberance.
    US The market is grinding on and should continue to, supported by earnings growth. If the leading tech stocks keep beating earnings, the market will keep going up.
    Europe The most attractive equity market in terms of earnings growth and return potential. Political worries have faded, leaving significant scope for a catch up relative to the US.
    Asia Pacific Earnings momentum has turned positive. China is cooling parts of its economy but the slowdown should be managed. The Fed could be the bigger worry for the region.
    Japan Market prospects are tied to global growth and currency moves. Inflation remains positive though; this could be a game-changer for companies after years of deflation.
    EMEA/Latin America Politics have become a prominent feature again, and the macro picture is decidedly mixed, but we continue to find good individual stock opportunities.
    Global sectors We favour the technology and healthcare sectors, where high levels of innovation are sustaining strong earnings growth.
    Fixed income
    Overall Expectations around Trump-flation have faded, and the Fed is now ahead of the curve after raising rates in June in the face of weak inflation. Yields to stay low.
    Inflation linked The outlook has become more balanced after a soft spot in US inflation. This may prove temporary and we see some value in US inflation-linked bonds.
    Investment grade Valuations now look rich by historical standards and the upside is limited. Europe is our preferred market given we have a buyer of last resort in the ECB.
    High yield Valuations in high yield are also stretched and now fail to adequately compensate investors for the risk they are taking on. We prefer Europe over US and Asia.
    Emerging markets Global growth momentum has slowed and there are also concerns over the slowdown in Chinese growth. We favour USD corporate bonds and local duration.
    Alternatives
    Commercial real estate: Continental Europe Investor demand remains high. Indeed, the risk of plentiful capital pushing income yields too low means investors need to be vigilant.
    Commercial real estate: UK Political and economic uncertainty has increased after the election. The silver lining could be a softer Brexit and even 'lower for longer' monetary policy conditions.
    Commodities Our leading indicator of global activity suggests growth is slowing, so we are less positive overall. We prefer energy to metals.
    Infrastructure and loans Infrastructure remains attractive as a source of diversified, uncorrelated returns although valuations are rich. Loans should outperform high yield bonds.

    For full details, read our Q3 Investment Outlook report.

    Download report
     

    This document may include general commentary on market activity, sector trends or other broad-based economic or political conditions that should not be taken as investment advice. Information stated herein about specific securities is subject to change. Any reference to specific securities should not be taken as a recommendation to buy, sell or hold these securities.

    This document is issued by FIL Responsible Entity (Australia) Limited ABN 33 148 059 009, AFSL No. 409340 (“Fidelity Australia”).  Fidelity Australia is a member of the FIL Limited group of companies commonly known as Fidelity International.

    Investments in overseas markets can be affected by currency exchange and this may affect the value of your investment. Investments in small and emerging markets can be more volatile than investments in developed markets.

    This document is intended for use by advisers and wholesale investors. Retail investors should not rely on any information in this document without first seeking advice from their financial adviser.  You should consider these matters before acting on the information.  You should also consider the relevant Product Disclosure Statements (“PDS”) for any Fidelity Australia product mentioned in this document before making any decision about whether to acquire the product. The PDS can be obtained by contacting Fidelity Australia on 1800 119 270 or by downloading it from our website at www.fidelity.com.au. While the information contained in this document has been prepared with reasonable care, no responsibility or liability is accepted for any errors or omissions or misstatements however caused. This document is intended as general information only. The document may not be reproduced or transmitted without prior written permission of Fidelity Australia. The issuer of Fidelity’s managed investment schemes is FIL Responsible Entity (Australia) Limited ABN 33 148 059 009. Reference to ($) are in Australian dollars unless stated otherwise. 

    © 2017 FIL Responsible Entity (Australia) Limited. Fidelity, Fidelity International and the Fidelity International logo and F symbol are trademarks of FIL Limited.

    Outlook for Global Equities

    On the surface the global outlook is certainly more positive than it was this time last year. Geopolitical risks are now easing whilst the European and Asian economies are looking relatively healthy.

    Global equities look attractive versus other asset classes. From a regional perspective, US valuations look expensive, with the US having outperformed the rest of the world over the past 5 years.

    The Federal Reserve (Fed) appears to have shifted from accommodating markets to focusing on labour markets and inflation. With fewer global issues to concern itself with, recent Fed comments would imply US rates are set to rise further and faster than the market expects. This would potentially signal the end of this economic cycle. On a positive note and despite the market’s bullish expectations waning of late, it is hard not to see some form of fiscal stimulus to come out of Washington.

    Geopolitically, Europe is increasingly cohesive, with the positive outcome of the French election there are now realistic hopes of positive reform moving forwards. However, potential flashpoints in the Middle East and North Korea remind us that risks remain. The Chinese have made little demonstrable progress on their debt problem and it is hard to see any real reform ahead of the Party Congress in November. That said, the immediate horizon looks clear.

    Europe and Asia are attractive on a relative basis, and Emerging Markets remain interesting. As ever, we remain focussed on stock specifics. It is still possible to find companies whose ability to generate superior profits is undervalued and the ever-changing world of technology continues to provide us with developments to play. Despite a seemingly more benign backdrop, investors need to remain vigilant. Volatility remains low and this can breed complacency from a risk management perspective. Under the surface the market remains rotational. Capital preservation should remain a top priority for investors over the next 12 months, as it is for me.

    This document may include general commentary on market activity, sector trends or other broad-based economic or political conditions that should not be taken as investment advice. Information stated herein about specific securities is subject to change. Any reference to specific securities should not be taken as a recommendation to buy, sell or hold these securities. This document is issued by FIL Responsible Entity (Australia) Limited ABN 33 148 059 009, AFSL No. 409340 (“Fidelity Australia”).  Fidelity Australia is a member of the FIL Limited group of companies commonly known as Fidelity International.

    Investments in overseas markets can be affected by currency exchange and this may affect the value of your investment. Investments in small and emerging markets can be more volatile than investments in developed markets.

    This document is intended for use by advisers and wholesale investors. Retail investors should not rely on any information in this document without first seeking advice from their financial adviser.  You should consider these matters before acting on the information.  You should also consider the relevant Product Disclosure Statements (“PDS”) for any Fidelity Australia product mentioned in this document before making any decision about whether to acquire the product. The PDS can be obtained by contacting Fidelity Australia on 1800 119 270 or by downloading it from our website at www.fidelity.com.au. While the information contained in this document has been prepared with reasonable care, no responsibility or liability is accepted for any errors or omissions or misstatements however caused. This document is intended as general information only. The document may not be reproduced or transmitted without prior written permission of Fidelity Australia. The issuer of Fidelity’s managed investment schemes is FIL Responsible Entity (Australia) Limited ABN 33 148 059 009. Reference to ($) are in Australian dollars unless stated otherwise. 

    Investments in overseas markets can be affected by currency exchange and this may affect the value of your investment. Investments in small and emerging markets can be more volatile than investments in developed markets.

    © 2017 FIL Responsible Entity (Australia) Limited. Fidelity, Fidelity International and the Fidelity International logo and F symbol are trademarks of FIL Limited.

    Has it ever been so risky to be safe?

    This is a difficult cycle to understand. The shares of Facebook, Amazon, Apple, Netflix, Microsoft and Google have all boasted strong returns over the past year, together accounting for almost half of the total return of the S&P500 despite making up only 15% of market capitalisation. Is this a bull market or a bubble? 
     
    Maybe it’s misleading to compare what’s going on to earlier booms. In the current market, it is investors’ fear of losses, as against their desire not to miss out on gains, that is fuelling price distortions. And new investment vehicles and strategies are amplifying the effect. Drawdown risks may hide in unexpected corners.
     
    History doesn’t always rhyme
    The saying goes that history doesn’t repeat, but it rhymes. Yet today’s exceptional growth in US technology stocks is quite different from the late 1990s bubble, when media and telecommunications companies took the lead amid a flurry of highly priced IPOs. 
     
    For one, it is by no means a global phenomenon. European equity markets, for example, are dominated by ‘old economy’ companies - oil, tobacco, pharmaceuticals and banks. In addition, capital investment today pales in comparison to the 1990s boom, which was about physical infrastructure as much as it was about software, creating the modern telecommunications infrastructure required to carry internet services (even if much speculative capital went up in smoke). 
     
    Funding is different too, as young companies remain in private hands for much longer than last time, when the equity market proved a willing provider of capital to new business ventures, shining a light on egregious valuations of early-stage companies.
     
    Can the largest tech stocks continue to outperform?
    FAAMNG: Facebook, Amazon, Apple, Microsoft, Netflix and Google. Price return rebased to 100 on 01/01/2010.
    Source: Fidelity International, Bloomberg, August 2017.
     
    Once bitten, twice shy
    If the last tech boom does not provide a useful analogy of what is going on, we need to look elsewhere for explanations. 
     
    In his recent investment letter, ‘There They Go Again…Again’, the legendary investor Howard Marks sounds a note of caution about the level of asset prices right across the spectrum, from equites to high yield notes and emerging market debt. He describes an environment where “pro-risk behaviour is commonplace.”
     
    I agree that the impact of market participants’ behaviour tallies with Marks’ view, but I think that we have reached this point of the cycle in asset prices almost entirely without the optimism or risk-seeking behaviour that Marks warns of. 
     
    In fact, I think investors' motives may be quite the opposite: still scarred by the financial crisis they have a powerful desire to avoid capital loss, even over the short term, and a need for stable returns from that capital. A broad-based belief that the outlook for the global economy remains highly uncertain -  a perception amplified by a political landscape of unprecedented instability - doesn’t help confidence.
     
    Whereas most bull markets and bubbles are driven by investors’ focus on capital gains, and their subsequent fear of missing out, I think that this market has been driven by an overwhelming desire for capital security or perhaps modest gain. Securities that offer certainty of yield (irrespective of the underlying assets) or certainty of growth (the tech mega-caps) have attracted the largest flows. These trends have persisted largely unchanged for years.
     
    Yet collectively, this risk-averse behaviour has driven asset prices to alarming levels. Where capital flows in, price increases duly follow. So prices of apparently safe, stable assets have soared, meaning long-term asset owners face a remarkably challenging market, where it has never been so risky to be safe.
     
    New marginal buyers
    If I am right and markets have been driven by an excess of prudence, then where is the marginal buyer coming from? To quote another legendary investor, Warren Buffet, “what the wise do in the beginning, the fools do in the end”. It’s common for asset price booms eventually to draw in investors who were initially sceptical. This was certainly true of the original tech boom, when the sceptics on the sidelines were taking on ever greater amounts of benchmark risk and career risk until most were forced to join the party. 
     
    But this time, it is not just sceptics joining the fray and pushing prices ever higher. More important is the boom in new, non-discretionary vehicles such as passive funds, ETFs and quant strategies. Again, it is worth highlighting that these allocation decisions are usually not founded in a ‘risk-on’ mind-set, but instead represent a desire for low-cost access - nothing more. 
     
    The number of indices is growing exponentially 
    Source: Fidelity International, Bloomberg, August 2017
     
    The cautious investor mind-set is also reflected in the growth of low-volatility strategies. They aim to achieve modest absolute returns through investing in low-volatility assets, reducing the risk of a loss of capital. Yet when investors flock towards particular assets over any length of time, the reported volatility of those assets declines, because drawdowns are contained by persistent buying. 
     
    What appears to be happening now is that the sustained inflows into tech mega-cap stocks in the US are fuelling a self-perpetuating cycle. Remarkably, these stocks have a realised volatility lower than consumer staples or utilities.1 This will have led to additional demand from minimum-volatility quant strategies and ETFs as well as market capitalisation-based passive strategies.
     
    Understanding this helps to explain not only the performance of the tech mega-caps in the US, but also why the dominant market capitalisation structures in other markets have persisted.
     
    FAAMG realised volatility is not only below the SPX, but also below staples
    (6 month realised volatility, %)
     
    FAAMG stocks are: Facebook, Amazon, Apple, Microsoft, Google.
    Source: Goldman Sachs, Fidelity International, June 2017.
     
    Too risky to be safe?
    There is little doubt that investors would do well to heed Marks’ warning about many asset prices. It may be true, as he points out, that value investors have a tendency to sound the alarm early, but there are certainly enough examples of allocations shifting to riskier assets - and of riskier assets becoming mainstream - to give us pause. 
     
    But, I think it is also important to consider the dominant investor psychology - the motives of significant actors - to assess the gains made in recent years. In contrast to the previous boom, it is a broad-based flight to safety and capital loss aversion that is fuelling the rise in US tech giants’ shares. 
     
    This leads me to very different conclusions about where the risks of material capital loss lie, if indeed we are approaching the end of the post-financial crisis bull market. 
     
    It could well be that securities which are unattractive to those with a strong aversion to capital loss may paradoxically prove to be the most resilient. In other words, if the price of avoiding volatility is elevated, there may be an economic rent for taking on the volatility that others reject.

     

    Views from Amit Lodha, Portfolio Manager Fidelity Global Equities Fund 

     
    a) I think Paras makes an excellent point around crowding and the fact that sentiment is very one sided in technology. We have been mindful of that (Why I took a break from Facebook) and our overweight in technology and software is being gradually reduced as on a bottom basis risk reward is not justified given valuations have risen faster than change in either delivery of actual free cash flow or material increase in forecasted cash flows. 
     
    b) I believe ETFs are the major force in the market and flows are driven more by the need for 'exposure to a theme' rather than a fundamental evaluation of the merits of the investment case and valuations. 
     
    c) During market corrections, correlations increase and the potential for the most hurt is where investors are crowded and conversely least where there is limited investor interest. If you make the case that then next correction will be driven by changes in the bond market and interest rate environment then the hitherto safety stocks or bond proxies (such as consumer staples, utilities, large cap pharmaceuticals and FAANG) would be most at risk whilst the pariahs (such as energy, materials and to an extent financials), which have low investor crowding, should do well. 
     
    As Paras says, each market correction is different so we wait and watch. 
     
     
     

    1 "Are FAANG the New Staples?" Robert Boroujerdi, Goldman Sachs, 9 June 2017

    This document may include general commentary on market activity, sector trends or other broad-based economic or political conditions that should not be taken as investment advice. Information stated herein about specific securities is subject to change. Any reference to specific securities should not be taken as a recommendation to buy, sell or hold these securities.

    This document is issued by FIL Responsible Entity (Australia) Limited ABN 33 148 059 009, AFSL No. 409340 (“Fidelity Australia”).  Fidelity Australia is a member of the FIL Limited group of companies commonly known as Fidelity International.

    Investments in overseas markets can be affected by currency exchange and this may affect the value of your investment. Investments in small and emerging markets can be more volatile than investments in developed markets.

    This document is intended for use by advisers and wholesale investors. Retail investors should not rely on any information in this document without first seeking advice from their financial adviser.  You should consider these matters before acting on the information.  You should also consider the relevant Product Disclosure Statements (“PDS”) for any Fidelity Australia product mentioned in this document before making any decision about whether to acquire the product. The PDS can be obtained by contacting Fidelity Australia on 1800 119 270 or by downloading it from our website at www.fidelity.com.au. While the information contained in this document has been prepared with reasonable care, no responsibility or liability is accepted for any errors or omissions or misstatements however caused. This document is intended as general information only. The document may not be reproduced or transmitted without prior written permission of Fidelity Australia. The issuer of Fidelity’s managed investment schemes is FIL Responsible Entity (Australia) Limited ABN 33 148 059 009. Reference to ($) are in Australian dollars unless stated otherwise. 

    © 2017 FIL Responsible Entity (Australia) Limited. Fidelity, Fidelity International and the Fidelity International logo and F symbol are trademarks of FIL Limited.

    Unearthing global pricing power

    With local insights from our research team based around the world, we have the unique ability to understand the eco-systems of the companies we invest in. This helps us make smarter investment decisions. Hear more from Amit Lodha, Portfolio Manager of the Fidelity Global Equities Fund.

    Fund facts

    Why Fidelity?
    Who we are
    About the Fund
    Past performance
    Top 10 holdings
    Understanding risk
    Management fees, distributions & minimum investment amount

    Learn more

    The Fidelity difference

    • 400 investment professionals3

      On the ground in 13 countries we have one of the largest buy-side research teams in the world. No matter which county a company operates in, we can call on our own world-class team to research its local and offshore connections first-hand.

    • 2,500 stocks researched

      The global equities universe is the richest opportunity set you can find. We focus on finding ideas beyond the indices. We focus on finding the winners of the future.

    • 360 view of stocks covered

      Our unrivalled global research network provides on-the-ground local touch points to each part of a company’s value chain. This enables smarter investment decisions as we gain a deep understanding of every company in which we invest.

    • 1 global research platform

      We operate on a single global platform with coverage across regions, sectors and market cap bands. This gives us a unique ability to connect the dots on a global basis and identify investment themes and ideas across different market cycles.

    Source: Fidelity International. Facts are correct as at 30 June 2017.

    A 360 degree view gives us the edge

    Naspers

    Naspers is a holding company for a group of media, communication and internet assets in more than 120 countries. Naspers is well known for its 34% holding in Tencent, the leading internet and mobile platform in China. Naspers meets our investment criteria with its strong management team and prospect for growth via their exciting media and internet properties in various markets.

    Meeting with management, suppliers, customers across the value chain

    Meeting

    Our analysts meet with Naspers in Johannesburg and London, and with Tencent in Beijing and Hong Kong. We talk with various unlisted parts of Nasper’s internet empire, such as Flipkart - the leading e-commerce website in India. Regularly meeting with Nasper’s competitors also provides insight into potential risks to our investment thesis.

    Shared in real time

    Through our proprietary global research platform, information on these meetings and other financial analysis is shared in real time with Fidelity analysts and portfolio managers in London and China.

    Refresh our views

    We constantly refresh our information, and we don’t just meet with management, we meet with competitors, suppliers and distributors. Every 120 days our analysts provide an updated note and earnings model for Naspers and every company they cover.

    Smarter investment decisions

    It is our obsession with research, with insights locally and globally which enable us to value a complex business such as Naspers. Informed by our 360 view, it is these types of companies with sustainable pricing power and strong management that we like to include in our portfolio.

    Information current as at 25 January 2016. References to specific securities should not be taken as a recommendation to buy, sell or hold these securities and may not represent actual holdings in the portfolio at the time of this viewing. For illustrative purposes only.

    Get insights

    Make our research advantage your advantage.
    Sign up for exclusive insights direct from Amit’s desk.

    • Market outlook & investment opportunities
    • A local lens on global investment themes
    • Fund portfolio performance updates
    View latest now

    By signing up, you are agreeing to be bound by our Privacy policy.

    Important information

    • 1. The major investable global universe means the world’s major market capitalisation for equities (as measured by the MSCI Asia-Pacific ex Japan, the MSCI Europe, the MSCI Japan, and the S&P 500 (US)) and global investment grade universe for credit (as measured by the Barclays Global Aggregate Corporate Index) at any point in time.
    • 2,3. Source: Fidelity International, 30 June 2017. ‘Investment professionals’ includes portfolio managers, analysts, research associates and traders. References to specific securities should not be taken as a recommendation to buy, sell or hold these securities and may not represent actual holdings in the portfolio at the time of this viewing. For illustrative purposes only.

    Fidelity data as at 30 June 2017 unless otherwise stated. This webpage is issued by FIL Responsible Entity (Australia) Limited ABN 33 148 059 009, AFSL No. 409340 (“Fidelity Australia”). Fidelity Australia is a member of the FIL Limited group of companies commonly known as Fidelity International.

    Prior to making an investment decision, retail investors should seek advice from their financial adviser. This webpage has been prepared without taking into account your objectives, financial situation or needs. You should consider these matters before acting on the information. You should also consider the relevant Product Disclosure Statements ("PDS") for any Fidelity product mentioned in this webpage before making any decision about whether to acquire the product. The PDS can be obtained by contacting Fidelity Australia on 1800 119 270 or by downloading from our website at www.fidelity.com.au. This webpage may include general commentary on market activity, sector trends or other broad-based economic or political conditions that should not be taken as investment advice.

    Information stated herein about specific securities is subject to change. Any reference to specific securities should not be taken as a recommendation to buy, sell or hold these securities. While the information contained in this webpage has been prepared with reasonable care, no responsibility or liability is accepted for any errors or omissions or misstatements however caused. This webpage is intended as general information only. The webpage may not be reproduced or transmitted without prior written permission of Fidelity Australia. The issuer of Fidelity’s managed investment schemes is FIL Responsible Entity (Australia) Limited ABN 33 148 059 009. Reference to ($) are in Australian dollars unless stated otherwise.

    © 2017 FIL Responsible Entity (Australia) Limited. Fidelity, Fidelity International and the Fidelity International logo and F symbol are trademarks of FIL Limited.

    Get Amit’s insights on companies around the globe
    in his quarterly
    e-newsletter.

    View latest now
    By signing up, you are agreeing to be bound by our Privacy policy.