Fidelity International (‘Fidelity’) today announces the launch of the Fidelity Global Future Leaders Fund (“the Fund”), providing investors access to developed market small and mid-cap equities which have been identified as ‘Future Leaders’. These stocks are typically in the early stages of growth underpinned by a structural shift, technology-led disruption or changing consumer behaviour.
Over the past 25 years or so, taken as a market segment, global mid-caps and small-caps have generated higher returns than large-caps (see Figure 1). Looking ahead, new leaders will continue to emerge from the mid-cap segment – in part due to the difficulties incumbents face in staying ahead of the curve.
Figure 1. Long-term total returns profile comparison (US$)
Source: Refinitiv DataStream, 31 August 2023. US$ total returns indices – MSCI World and MSCI World Mid Small Cap Index.
Past performance is not a reliable indicator of future performance
Portfolio Managers James Abela and Maroun Younes, aim to construct a diversified and balanced portfolio that delivers more consistent returns through different market cycles. The portfolio will hold 40-70 listed global small1 to mid2-caps that are a blend of ‘quality’ (c. 40%), ‘value’ (c. 30%), ‘transition’ (c. 20%) and ‘momentum’ (c. 10%) companies3. A minimum of 50% of the Fund’s assets are invested in securities deemed to maintain sustainable characteristics4.
‘Quality’ refers to structural growth businesses with solid management teams, offering one or more of persistent earning streams, favourable market structures, industry leaders and long-term compounders. ‘Value’ represents strong business models that are currently out of favour but generate high free cash flow yields, potential to unlock undervalued assets through industry changes or shifts in market perception. ‘Transition’is defined as special situations or turnarounds with visible catalysts that can lead to notable upward shifts in earnings, valuations and share price outcomes, while ‘momentum’ businesses are cyclical companies in an upward industry earnings cycle.
James Abela, Portfolio Manager, Fidelity International, shares: “There’s so much more to global investing than the mega household names such as Apple and Amazon that everyone is familiar with, and perhaps already own. There is a whole world out there and so many diverse opportunities, which are often under-researched. Yet therein lies the opportunity, since the relative lack of research on mid-caps and small-caps increases the likelihood that high-quality businesses with tremendous growth potential are flying under the radar and trading at attractive valuations.”
Dennis Pellerito, Head of UK Wholesale, Fidelity International, adds: “The global small and mid-cap universe is a wide and diversified opportunity set. Research plays a vital role in finding companies in their earlier stages of growth, which is why it’s important to choose a fund manager, like Fidelity, with the global reach to find market inefficiencies and help inform investment decisions. Our new Global Future Leaders Fund provides UK investors the opportunity to invest in global large caps of tomorrow, today.”