The market capitalization of emerging-market companies has grown nearly twelve fold over the last 10 years, relative to other global stock categories, notes Fidelity Investments. And investors and financial advisors alike are increasingly considering regional funds as potential building blocks for a diversified investment portfolio. To facilitate this trend, Fidelity is launching a new international equity fund — the Fidelity Emerging Europe, Middle East, Africa (EMEA) Fund with retail and advisor share classes.
The Fidelity EMEA Fundo Ticker: FEMEXo Expense Ratio: 1.42%o Minimum Investment: $2,500o Portfolio Manager: Adam Kutas
“Emerging markets have grown significantly in recent years, and — if long-term growth forecasts are accurate — these markets could advance beyond the 12 percent share of the global equity market that they now comprise,” says Sanjiv Mirchandani, president of Fidelity Personal and Workplace Investing Growth Business. “By launching a first-of-its-kind equity fund for U.S. investors dedicated to emerging Europe, Middle East and Africa markets, we’re working to help those with high risk tolerances and long-term outlooks gain targeted exposure to areas of the world that may be under-represented in their portfolios.”
Fidelity EMEA Fund aims at capital appreciation and normally will invest at least 80 percent of its assets in securities of emerging Europe, Middle East, and Africa issuers and other investments tied economically to the EMEA region, the investment company explains. The fund will compare its performance to the MSCI Emerging Markets Europe, Middle East and Africa (or MSCI EMEA) Index.
The EMEA region includes 80-plus countries, from Russia and Eastern Europe to the Middle East and the entire African continent, and more than 1.5 billion people. It is home to one of the fastest growing and rapidly urbanizing populations in the world and contains most of the world’s proven oil reserves and natural resources, Fidelity explains.
Adam Kutas, a 12-year Fidelity veteran who previously co-managed Fidelity Latin America Fund, manages the fund from Fidelity Management and Research Company’s London office. “A few factors have combined to give us confidence that, indeed, EMEA represents a bonafide investment opportunity for certain clients,” says Kutas.
“First, there are an ever-growing number of EMEA companies with solid earnings growth that, importantly, now represent significant market capitalization. Second, we’ve found that many of these EMEA companies are under-researched and under-followed by investors,” the Fidelity portfolio manager explains. “And third, we’ve assembled a dedicated team of analysts here in London that provides us with extensive resources to closely cover the region across its many different market sectors, including energy, financials, telecommunications, materials, and health care, among others.
“We’re excited to provide U.S. investors and advisors with the first equity mutual fund dedicated to this fast growing area of the world,” adds Kutas. “We see the EMEA Fund as a viable investment option for long-term investors and advisors who are seeking portfolio diversification and who already have a diversified international portfolio, as the EMEA region has historically tended to exhibit a low correlation to the U.S. and developed markets, and also has had low inter-market correlation.”
As of March 31, Fidelity International’s EMEA fund, which is separately traded from Fidelity Investment’s new EMEA fund, reported holdings in energy firms, such as Russia’s Gazprom, and commodity companies like Impala Platinum and Anglo Platinum. Other top holdings included MTN Group, Sasol, Lukoil Holdings, African Rainbow and Vostok NAFTA. South African holdings represented nearly 40 percent of the fund; Russian companies were 30 percent, and Australian firms were 5 percent. It had nearly $1 billion in assets in April.
In other news at Fidelity, the investment company says Noriko Takahashi is now a co-portfolio manager of the Fidelity International Small Cap Fund (FISMX), joining co-managers Wilson Wong and Colin Stone on June 1. Takahashi has assumed responsibility for the fund’s investments in Japan and succeeds Tokuya Sano, who will focus on managing equity portfolios available exclusively to overseas investors.
Takahashi has managed Japanese small-cap equity portfolios for eight years, Fidelity says, and started work at Fidelity in March 2008 after employment at Goldman Sachs Asset Management, where she was co-head of the Japanese equity small-cap team, a vice president and a portfolio manager.
Janet Levaux, MBA/MA., is the managing editor of Research; reach her at email@example.com