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Fidelity revamps veteran’s fund to tap short duration demand

Fidelity revamps veteran’s fund to tap short duration demand

Fidelity International has overhauled and renamed Rick Patel’s global short-term bond fund to tap into the increasing demand for short duration strategies, Citywire Selector has learned.

According to a shareholder note, the existing Fidelity Funds – Global High Grade Income fund will be reworked as the Fidelity Funds – Global Short Duration Income fund. This will come into effect from 7 December.

The move will see Patel’s Luxembourg-domiciled strategy more closely aligned with the existing Fidelity Funds – Global Income fund, but with a clearer emphasis on short duration holdings.

In the note, Fidelity said: ‘The proposed changes to the strategy will result in the fund investing across a broader fixed income universe.

‘It will have greater flexibility to invest in investment grade corporate bonds and up to 50% of its assets in high yield bonds, including high yielding debt securities, which normally carry sub-investment grade ratings.’

The duration of the fund will be capped at three years, while the new remit will also allow Patel to invest in emerging markets, below investment grade, high yield and Chinese fixed income instruments.

It is also understood that the new approach will involve greater levels of active management from Patel, as well as a wider asset mix and increased investment flexibility.

Explaining the rationale for the change, Fidelity said: ‘The fund will change its name and investment objective in response to significant appetite for Fidelity to develop a short duration fixed income product that seeks to deliver attractive income to investors whilst demonstrating low sensitivity to changes in interest rates.’

The fund as it currently stands has €135 million in assets under management. It has lost 10.8% in US dollar terms over the three years to the end of October 2017, compared with a 1.9% fall by its Citywire-assigned benchmark, Citi WGBI 1-3 Years TR, over the same period.

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