Fidelity Germany A-Dis-EUR

Analyst Report
Morningstar's Take
|31/08/2020

by Natalia Wolfstetter
Fidelity has announced the appointment of Tom Ackermans as co-portfolio manager of Fidelity Germany, alongside lead manager Christian von Engelbrechten, effective from Aug. 1, 2021.

Ackermans joined Fidelity in 2013 as an analyst with prior experience at Barclays Capital and Kempen & Co. During his 13-year investment career, he has covered various sectors, including European banks and European integrated oil & oil services. His current coverage is focused on US payments, fintech, exchanges, and info services. From February 2019 to February 2021, as sector leader of Financials he was involved in the running of Fidelity Euro Blue Chip, which is a portfolio that is constructed directly with the best ideas of Fidelity's Europe-equity analysts. Apart from that he has no prior portfolio management experience and his involvement with German stocks has been limited. However, he speaks German and will relocate to Frankfurt, which should be helpful in getting up to speed on current and prospective portfolio holdings.

Ackermans’ appointment is part of Fidelity’s evolution towards a team-based investment approach, and to provide additional resources to the strategy. Indeed, we have seen similar co-portfolio management structures introduced to other equity products at Fidelity. As a comanager, Ackermans will have dealing authority on the portfolio and co-accountability for performance. He will debate investment ideas and contribute own ideas to the portfolio. He will retain his current research coverage.

Christian von Engelbrechten, who has run the strategy to good effect since being named lead manager in 2011, retains the ultimate responsibility, and the investment process will remain unchanged. The comanager appointment does not warrant changes to the Above Average People Pillar rating or any of the share classes’ respective Morningstar Analyst Ratings.

Fidelity Germany benefits from an experienced manager with strong stock-picking skills and extensive analytical support. Under our enhanced ratings framework, which places a greater focus on fees and expected benchmark-relative performance, cheaper share classes, including the Y clean share class, are upgraded to a Morningstar Analyst Rating of Gold, while the rating for the pricier retail share classes is lowered to Bronze. Christian von Engelbrechten has managed this strategy since 2011, but his involvement with the fund goes back to 2005, when he joined Fidelity as an analyst covering German stocks. Fundamental company research is at the heart of the approach, and here the manager relies extensively on Fidelity’s Europe-equity analysts, who provide in-depth coverage of the fund’s investment universe (HDAX). The fund is mostly invested in large caps, though small and mid-caps have historically accounted for up to 40% of assets. More recently, their share has been below 20%. This also drives the fund’s active share, which is currently at the lower end of its typical 40%-60% range.The manager focuses on companies’ ability to deliver structural growth. He seeks quality firms with healthy balance sheets and clear competitive advantages, as reflected in an above-average return on invested capital and profit growth. The portfolio is built around 40-50 high-conviction holdings. Yet the approach is not applied dogmatically. Deviations from the HDAX can be meaningful, but the manager keeps the benchmark in mind when constructing the portfolio. While the quality growth bias is clearly reflected in the portfolio through above-average growth, quality, and valuation metrics, it has been reined in since the fund suffered a severe underperformance in the value-oriented market of 2016. We believe this makes sense within the limited investment universe of a country fund. Performance is predominantly derived from stock selection, which has for the most part been strong over the manager’s tenure, including periods when active share trended lower. Thanks to the managers' quality bias and skillful execution, the fund has often protected capital better than peers and the benchmark in challenging conditions, including the first quarter of 2020.

Morningstar Analyst Rating™
To find out how Morningstar rates a fund click here.
Portfolio RoleSpecialty.
Morningstar Pillars
PeopleAbove Average
A capable and experienced manager well-supported by ample research resources at Fidelity.
ParentAbove Average
Changes to the senior management team require monitoring, but we continue to consider Fidelity International an above-average parent.
ProcessHigh
The fund pursues a well-thought-out and consistently implemented bottom-up approach.
Performance
Under the manager's tenure, the strategy has served investors well.
Morningstar Analyst RatingMorningstar evaluates funds based on five key pillars, which it's analysts believe lead to funds that are most likely to outperform over the long term on a risk-adjusted basis.
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