Winners of the Morningstar Fund Award are recognized as funds that have added the most value within context of a relevant peer group for investors over the past year and over the longer-term.
To help our readers better observe what makes a fund a winner fund, we sent out questionnaires to the winning fund teams earlier and asked them to shed lights on their team structure, how various risks have affected their investment decisions, and the major portfolio changes over last year, etc.
Category Winner: Best US Large-Cap Equity Fund - Fidelity America A-USD
Key Stats
Inception Date: 1990 Oct1
Morningstar Rating (as of 2014-02-28):
Total Net Assets (Mil, as of 2014-02-28): 4,670.86 USD
Manager: Adrian Brass
Manager Start Date: 2008 Jan1
M: Morningstar A: Adrian Brass
M: Could you highlight any major changes you made to the portfolio over the course of 2013? Were there any particular holding that drove the fund’s performance for the year?
A: I continue to follow my investment approach, looking for stocks with valuation upside and a catalyst to realise this value. This approach led me to invest in a number of healthcare and pharmaceuticals companies resulting in an overweight position in the healthcare sector at the beginning of last year. This overweight position in the sector contributed positively to the performance of the fund in 2013. Looking at individual stocks within the sector, the position in Gilead, the leader in blood treatment, added value, as some of their key products received faster than expected approval from the FDA and as demand for its flagship HIV drugs exceeded estimates. Pharmacy Benefit Manager and key holding in the fund, McKesson, also supported returns as a potential deal with a European competitor that would increase their global footprint in drugs distribution, was announced. More generally, we think that there is further potential for pharmacy benefit managers that are looking at improving drug distribution and reducing healthcare costs as the US healthcare reform gets under way. Strong stock selection in food & staples retailing companies also paid-off. Pharmacy Benefit Manager and drugstore network CVS Caremark’s performance was well above expectations and Canadian convenience network, Alimentation Couche-Tard contributed in view of the expected consolidation of the petrol station convenience stores market. Overall the fund benefitted from strong stock selection and sector allocation.
M: What is your economic outlook for 2014 specific to the markets you cover and how are you positioned to take advantage of opportunities and/or mitigate potential risks?
A: I remain positive for the economic outlook for 2014. We expect US companies to continue to do well and we anticipate a pick up in the level of capital expenditure that has been relatively low until now, as business confidence improve. We also foresee a continuation of the housing recovery that has only started. The number of new houses being built (currently at just below 1m ) remain well below the pre-crisis level and is still below the normalised level of 1.5 million annualised. This coupled with improving labour conditions should provide a boost to consumer spending and in turn the economy. Generally we feel comfortable with the level of earnings expectations for US corporates (in high single digit) and we anticipate the market to grow in line with earnings this year without any further multiple expansion. We expect some volatility along the way with geopolitical issues as markets valuation are only neutral but remain positive for the year as a whole.
M: Can you comment on the risks facing the global economy, including the tapering of bond buying in the US and the growth headwinds facing the emerging world? How do these risks affect your investment decisions?
A: I believe that the tapering of bond buying is mostly priced in the markets at this level as it has been widely anticipated in the past 9 months since the first talks in May last year. In terms of the Emerging Markets turbulences, It is true that some companies will be affected by more sluggish growth in some markets and we are monitoring this closely. Nevertheless we are finding enough investment opportunities in the US market where the slowdown in emerging market is not a concern and with a US recovery under way, some stocks that are exposed to the higher US growth prospects.
M: How is your investment team organized? Have there been or do you anticipate any changes to the investment team or structure over the course of the year? Do you anticipate adding to the team in the near future?
A: I work alongside four other US equities managers who all manage different strategies. We all rely on our 17 strong team of analysts and use their knowledge and ideas to build our portfolios following our own investment approach and philosophy. There hasn’t been any changes to this structure in the course of last year.
M: Can you highlight any areas where you feel that the investment team or the investment process can improve upon
A: I believe that the current organisation is ideal for a bottom up stock picker like myself. I work with a great team of analysts whose knowledge of companies and sectors is unparallelled. Access to companies is also excellent and I am surrounded by equally passionate bottom up investors with whom I can debate stock ideas. I haven’t changed my approach since taking over the portfolio in 2008 and this has delivered strong performance over my tenure.
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