Fidelity Future Leaders Fund aims to achieve returns in excess of the S&P/ASX 200 Mid Small Index over the suggested minimum investment time period of five to seven years. The Fund provides investors with the potential for long-term capital growth by investing in a portfolio of listed mid- and small-cap Australian shares.
The Fund outperformed the index over the quarter, which contributed to its strong relative performance over the six months and one year periods. Robust stock picking within materials and an overweight stance in the IT sector contributed to returns. Conversely, selected consumer discretionary holdings held back gains. The IT sector benefited from the broad-based market strength stemming from positive news flows around developments in AI. Thus, our preferred positions in on-demand connectivity provider Megaport and cloudbased end-to-end logistics software provider WiseTech advanced. Megaport also delivered solid corporate results and profit guidance, which led to an earnings upgrade. Positions in lithium miner Leo Lithium, specialty lithium chemicals company Allkem and clean energy miner IGO tracked the strength in lithium prices amid robust structural demand prospects supported by a global decarbonisation theme and a transition to electric vehicles (EVs). These gains were partially offset by the holding in gold miner Gold Road Resources as it lowered its annual production guidance. Its management cited issues related to the availability and utilisation of production drill and blast crews.
Nonetheless, the company’s structural thesis remains intact. Shares in international student placement provider IDP Education declined. Investor sentiment was subdued after the Canadian government approved four additional English language tests for its visa application programme, which narrows IDP’s competitive moat. Meanwhile, the holding in fashion jewellery and accessories retailer Lovisa was pressured amid concerns over the pace of consumer spending. We follow a rigorous process and disciplined approach, where the viability, sustainability and credibility of the business model remain the pillars of success. The focus is on bottom-up stock selection to find sustainable quality names as well as fundamentally strong cyclicals with strong cash flows at reasonable valuations. During the quarter, we continued to strengthen the exposure to companies that are long-term winners, where valuations remain reasonable. The Fund’s exposure to lithium assets were increased amid structural demand prospects, supported by a global transition to EVs. As such, we bought new holdings in lithium miners Leo Lithium and Core Lithium and increased the allocation to Allkem and IGO. Within gold miners, we took some profits in Evolution Mining following its recent strong stock price performance and bought a new holding in Gold Road Resources given its transparent operations, solid balance sheet and consistent cash flow profile. A new position was purchased in leading self-storage provider National Storage. The real estate investment trust (REIT) is a fundamentally solid company with robust growth prospects supported by a structurally growing theme in storage facilities. We took some profits in electronic circuit board manufacturer Altium and cloud-based end-toend logistics software provider WiseTech Global following their recent share price rally.
Elsewhere, we sold our positions in energy distributor and retailer Ampol and leisure and entertainment company Tabcorp.
What is Fidelity Future Leaders Fidelity Future Leaders is an Managed Funds investment product that is benchmarked against ASX Index Small Ordinaries Index and sits inside the Domestic Equity - Small Cap Index. Think of a benchmark as a standard where investment performance can be measured. Typically, market indices like the ASX200 and market-segment stock indexes are used for this purpose. The Fidelity Future Leaders has Assets Under Management of 1.07 BN with a management fee of 1.2%, a performance fee of 0.00% and a buy/sell spread fee of 0.5%.
How has the investment product performed recently? The recent investment performance of the investment product shows that the Fidelity Future Leaders has returned 2.14% in the last month. The previous three years have returned 2.98% annualised and 15.58% each year since inception, which is when the Fidelity Future Leaders first started.
How is risk measured in this investment product? There are many ways that the risk of an investment product can be measured, and each measurement provides a different insight into the risk present. They can be used on their own or together to perform a risk assessment before investing, but when comparing investments, it is common to compare like for like risk measurements to determine which investment holds the most risk. Since Fidelity Future Leaders first started, the Sharpe ratio is NA with an annualised volatility of 15.58%. The maximum drawdown of the investment product in the last 12 months is -7.24% and -28.52% since inception. The maximum drawdown is defined as the high-to-low decline of an investment during a particular time period.
What is the relative performance of the investment product? Relative performance is what an asset achieves over a period of time compared to similar investments or its peers. Relative return is a measure of the asset's performance compared to the return to the other investment. The Fidelity Future Leaders has a 12-month excess return when compared to the Domestic Equity - Small Cap Index of 6.82% and 0.85% since inception.
Does the investment product produce Alpha over its Peers? Alpha is an investing term used to measure an investment's outperformance relative to a market benchmark or peer investment. Alpha describes the excess return generated when compared to peer investment. Fidelity Future Leaders has produced Alpha over the Domestic Equity - Small Cap Index of NA% in the last 12 months and NA% since inception.
What are similar investment products? For a full list of investment products in the Domestic Equity - Small Cap Index category, you can click here for the Peer Investment Report.
What level of diversification will Fidelity Future Leaders provide? Fidelity Future Leaders has a correlation coefficient of 0.9 and a beta of 1.21 when compared to the Domestic Equity - Small Cap Index. Correlation measures how similarly two investments move in relation to one another. This establishes a 'correlation coefficient', which has a value between -1.0 and +1.0. A 100% correlation between two investments means that the correlation coefficient is +1. Beta in investments measures how much the price moves relative to the broader market over a period of time. If the investment moves more than the broader market, it has a beta above 1.0. If it moves less than the broader market, then the beta is less than 1.0. Investments with a high beta tend to carry more risk but have the potential to deliver higher returns.
How do I compare the investment product with its peers? For a full quantitative report on Fidelity Future Leaders and its peer investments, you can click here for the Peer Investment Report.
How do I compare the Fidelity Future Leaders with the ASX Index Small Ordinaries Index? For a full quantitative report on Fidelity Future Leaders compared to the ASX Index Small Ordinaries Index, you can click here.
Can I sort and compare the Fidelity Future Leaders to do my own analysis? To sort and compare the Fidelity Future Leaders financial metrics, please refer to the table above.
Has the Fidelity Future Leaders been independently verified by SMSF Mate? This investment product is in the process of being independently verified by SMSF Mate. Once we have verified the investment product, you will be able to find more information here.
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Comments from SMSF Mates SMSF Mate does not receive commissions or kickbacks from the Fidelity Future Leaders. All data and commentary for this fund is provided free of charge for our readers general information.
Performance Commentary - March 31, 2023 Since inception, we have maintained a consistent portfolio construction approach, which leads to a natural tilt towards quality.
Simultaneously, we have been cautious about intensifying global debt burdens and its impact on the cost of capital from a long-term perspective. As the global investor community aligned with this view, the search for quality intensified. Against this backdrop, the Fund’s persistent conviction in quality supported the outperformance. Preferred holdings in Altium and WiseTech Global contributed to returns.
Investors widely appreciated these stocks as they delivered solid results and reaffirmed their outlook in an uncertain market environment. The position in Fisher & Paykel Healthcare also advanced as it upgraded its full-year revenue guidance amid increased Covid-19 related sales of its hospital hardware and consumables in China. Investors preferred shares in REA Group as it remains a long-term compounder with robust margins, significant cash flows and an under-geared balance sheet. Not holding Whitehaven Coal enhanced relative returns. Shares slid in line with declining thermal coal prices. An improving sentiment towards China and an expected travel rebound supported the position in Flight Centre Travel Group. It also reported strong corporate earnings and announced the acquisition of Scott Dunn, which was well received by the market. The holding in Collins Foods advanced. A decline in real income has shifted consumer dynamics with an increased preference for fast food outlets to cafes and restaurants. Market enthusiasm was also backed by its plans to expand its presence in the Netherlands. We follow a rigorous process and disciplined approach, where the viability, sustainability and credibility of the business model remain the pillars of success. The focus is on bottomup stock selection to find sustainable quality names as well as fundamentally strong cyclicals with strong cash flows at reasonable valuations. During the quarter, we continued to strengthen the exposure to companies that are long-term winners, where valuations remain reasonable. A new position was purchased in CSR. It as a stable market position and continues to benefit from active end market activities. We also bought a new holding in Domino’s Pizza Enterprises. The correction in its share price reflects attractive earnings improvement prospects as cost pressures are expected to subside. An expected decline in disposable incomes should aid consumer preference for fast food, making it a defensive opportunity. The allocation to quality holdings in Pro Medicus was increased. Pro Medicus’ growth outlook is supported by its expanding share in the US imaging software market. The company has sticky revenue streams linked to US test volumes, coupled with long-term contract wins across prestigious health care institutions. The allocation to Pinnacle Investment Management was trimmed. The holding in PWR was reduced amid valuation concern.
Performance Commentary - January 31, 2023 
Performance Commentary - December 31, 2022 The Fund delivered positive results but underperformed the index over the quarter. Information technology stocks remained out of favour over the three-month period, and our preferred positions came under pressure.
Short-term weakness amid detractors
The holding in on-demand connectivity provider Megaport declined as its latest results fell short of market expectations. Nonetheless, its robust business fundamentals support a long runway for growth. Shares in restaurant franchise operator Collins Foods declined as it delivered subdued results. Investors were disappointed by its weak margin guidance amid building cost pressures and weakness at its Taco Bell business. The position in online real estate portal REA Group declined amid a dim outlook for listings against the backdrop of weak industry trends in an environment of rising interest rates.
Selected materials holdings declined
Lithium miners slid amid concerns about peak pricing and valuation premiums as the weakening global economic growth outlook undermined investor confidence. This hurt the holding in lithium producer Core Lithium. Conversely, gold miner Evolution Mining rose in line with gold prices and a favourable demand outlook for the commodity. Its robust balance sheet and quality gold exposure hold it in good stead.
Performance Commentary - September 30, 2022 Renewed uptrend in lithium prices supported selected EV players Lithium prices reached record levels as supportive electric vehicle (EV) polices globally continued to underpin demand, while recent heat wave driven power cuts in China negatively impacted supply in an already tight market environment. Consequently, a renewed uptrend in lithium prices led holdings in lithium and tantalite mining company Pilbara Minerals, clean energy focused miner IGO and specialty lithium chemicals company Allkem higher.
Robust earnings underpinned selected positions Conviction quality positions proved rewarding, as evidenced by the allocation to automobile parts manufacturer PWR Holdings and electronic circuit boards manufacturer Altium. These long-term structural growth compounders with strong outlooks have robust market shares and product offerings, which was reaffirmed by their solid results during the recent reporting season. Strong earnings also supported the performance of fast fashion jewellery retailer Lovisa Holdings. Lovisa exhibits encouraging structural growth prospects, underpinned by its scalable business model with high returns on capital, low capital investment and significant store rollout opportunities.
Short-term weakness amid detractors The lack of exposure to coal miner Whitehaven Coal held back relative returns as its shares advanced in light of surging coal prices. The manager continues avoid the stock given its less favourable sustainability backdrop. Fuel refiner and retailer Viva Energy declined amid concerns over peak margins. Elsewhere, inflationary pressures and a weak macroeconomic backdrop weighed on selected consumer discretionary holdings, including restaurant franchise operator Restaurant Brands New Zealand and restaurant franchise operator Collins Foods.
Performance Commentary - June 30, 2022 Selected materials holdings engaged in the electric vehicle (EV) value chain detracted from returns, while conviction defensive positions contributed to performance. Lithium prices declined amid market concerns about peak metal pricing as a leading broker highlighted that its supply outsized demand trends. Consequently, the position in lithium and Pilbara declined. The weakness in lithium prices also led to concerns over related market players engaged in the EV life cycle and impacted holdings in IGO and IMDEX. These companies offer structural growth opportunities and are well placed to gain from favourable demand dynamics in the global EV space.
The position in Evolution Mining declined amid a weaker profit outlook for the company. It lowered its production guidance amid a delay at its Red Lake asset and cited inflationary pressures as revised its cost guidance upwards. Elsewhere, the holding in Breville Group declined amid inflation concerns and expectations of weakening consumer spending. It continues to provide attractive long-term structural growth opportunities, driven by deeper penetration into existing markets, coupled with entry into new countries and new product launches. Conviction positions in companies with defensive revenue streams contributed to performance in an environment of rising rates and high inflation. Positions in Collins Foods and Vicinity Centres are further supported by resilient consumer demand trends. The holding in Auckland International Airport is underpinned by expectations of a rebound in travel as economies reopen globally. We follow a rigorous process and disciplined approach, where the viability, sustainability and credibility of the business model remain the pillars of success. The focus is on bottomup stock selection to find sustainable quality names as well as fundamentally strong cyclicals with strong cash flows at reasonable valuations.
During the quarter, we continued to strengthen the exposure to companies that are long-term winners, where valuations remain reasonable. We increased the exposure to defensive stocks amid an uncertain market environment of rising interest rates, high inflation and concerns over an economic slowdown. A new position was purchased in Worley. Its shares are supported by its exposure to high margin complex green energy projects and its operations are sheltered from the negative impacts of rising rates and high inflation. A new holding was added in Ampol and the exposure to Viva Energy was increased. Both companies have defensive earnings stream and are well placed to benefit from an earnings recovery following Covid disruptions.
A new position was bought in toll road operator Atlas Arteria as a defensive play. The allocation to Netwealth was increased as it offers longterm structural growth opportunities. We took some profits by reducing the exposure to Allkem, Oz Minerals, and lithium and Pilbara Minerals following their strong share price performance.
Performance Commentary - March 31, 2021 The portfolio underperformed the index over the quarter. Preferred technology-driven holdings came under pressure as investors continued to rotate in favour of value stocks as a result of normalization
Performance Commentary - February 28, 2021 Invests in 40 to 70 Australian small and mid-cap stocks, using Fidelity’s global
research capabilities to identify the companies of tomorrow
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