Fidelity Asian High Yield A-Acc-EUR |
by Arvind Subramanian
Lei Zhu will join as head of Asian fixed income in January 2023 and report to Steve Ellis, global CIO, fixed income. Zhu fills the vacancy left by former head Marty Dropkin, who was appointed as head of equities, Asia Pacific, in July 2022, and where she will manage all fixed-income portfolio managers in Asia and not have any portfolio management responsibilities. Meanwhile, Ellis continues to serve as the interim head of Asian fixed income. Zhu joins from Credit Suisse Asset Management where she spent a decade and was most recently its head of fixed income Asia. She has managed several strategies across Asian hard-currency corporate credits and local currency bonds since 2012. She previously worked at DBS for seven years. Elsewhere, Bich Nguyen recently joined as director of research, Asian fixed income, succeeding Nitesh Kathuria, who remains as a senior credit research analyst in the team. The Asian credit research team now reports into Nguyen, who in turn reports into Gita Bal, global head of fixed-income research. Ngyuyen succeeds Kathuria’s previous responsibilities, including the management of the research team and research process. She has over 30 years of fixed-income research and portfolio management experience with focus on emerging-markets debt and Asian fixed income. She was previously CIO for fixed income and a portfolio manager at Taiping Asset Management. While it will take time to observe the integration of Zhu and Nguyen into the broader Asian fixed-income team and whether there will be any future changes, we do not expect these appointments to have any material impact on the day-to-day management of this strategy. |
Elevated analyst turnover is a concern for this bottom-up-driven strategy, warranting a downgrade of its People Pillar rating to Below Average from Average. All share classes continue to earn an overall Morningstar Medalist rating of Neutral. The strategy has been led by lead managers Tae-Ho Ryu and Terrence Pang since July 2020. Though the two boast 16 and 10 years of investing experience, respectively, Ryu and Pang have no prior experience as lead portfolio managers, making them relative newcomers compared to some category rivals. Since 2020, the credit research team has seen a total of seven departures within a team of 12, which compares unfavorably to peers in the region. While the departures have been adequately backfilled, this has nonetheless resulted in a low average firm tenure, and it remains to be seen whether the new joiners will be able to integrate into the team and Fidelity’s investment process. This hard-currency Asia high yield-focused strategy seeks to outperform its benchmark, the JPMorgan ACI Non-Investment Grade Index, primarily through bottom-up credit selection, while also providing a high level of income. The structured investment process leverages the wide-ranging top-down and bottom-up capabilities available in the Asian fixed-income team. However, concentrated sector and issuer bets, particularly within the China property industry, have resulted in severe drawdowns in the past. Under Tae-Ho Ryu and Terrence Pang’s leadership from July 2020 through April 2023, the strategy has struggled. Its Y-Acc USD clean share class has lost 10.3% annually over the period, underperforming its benchmark by 3.7% and trailing the majority of its peers in the Asian High Yield Bond Morningstar Category. The strategy’s underperformance during this period was primarily on account of the portfolio’s overweight exposure to the China property sector, as well as some credit selection stumbles. While the team has since trimmed many of the portfolio’s riskiest exposures and aims to apply stricter risk controls going forward, it remains unclear whether they are equipped to deliver outperformance over the long term. |
Morningstar Pillars | |
People | Below Average |
Parent | Above Average |
Process | Average |
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