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Stein & Wolf, Part 2: Merging multiple global assets

Fidelity's Geoff Stein and David Wolf discuss how they blend quality global stocks with fixed-income securities.

Jess Morgan 4 December, 2015 | 6:00PM
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Geoff Stein: Over the years at Fidelity and in my current investment business, I've kind of developed a general framework for thinking about the type of investing that we do: multi-asset investing. It involves four key lenses that we like to look at the world through: macro indicators – economic growth, inflation, monetary policy, currencies and so forth – bottom-up company fundamentals, which we think are important; valuation of different asset classes; and investor sentiment.

So that’s kind of the rubric that we sort of go back to on a frequent basis, to sort of think about what's happening in the world and what we see changing on the margin. Then I think what David's brought to the table with his background is not only a great deal of global experience, but also a very specific and extremely deep expertise on Canada.

David Wolf: Yeah, I mean the way that I like to say it is Geoff's experience is very broad and mine is more deep. So I've spent my entire career studying the Canadian economy, Canadian macro environment, Canadian markets and that's as a sell-side economist, as a strategist, as a central banker and now as a portfolio manager. I think it's highly complementary.

So Geoff and I, in the two years that I have been at Fidelity, have forged an incredible partnership. We're in touch constantly, even though he is in Boston and I'm based here in Toronto. Talking about the issues, talking about the outlook, what we're doing on the funds, et cetera. But he is bringing a very different set of experiences and skills to the table than I am and I think that’s complementary, Geoff having the broad set of skills, mine having a more deeper experience with respect to Canada. It’s actually a very effective combination in terms of managing these multi-asset funds in Canada, which require contributions from both the breadth and the depth.

Stein: So Global Monthly Income Fund is a fund that is really structured to take advantage of Fidelity's diverse strengths across a number of different underlying asset classes, where we actually have global capabilities. So specifically we have a core global equity income portfolio that’s managed by Ramona Persaud of our FMR operation out of Boston. And she has been generating a lot of alpha in the equity markets over these last couple of years since the fund was transformed into its current structure, which was back in 2013.

She's done a great job stock picking globally with not only a focus on maximizing yield as some equity income managers tend to focus on, but rather thinking about sort of dividends as a source of return from a little bit broader perspective, and that is that they can produce yield. But you also have to think about dividend growth and companies that can increase their payout ratios over time and translate their earnings success and their cash flow generation into tangible dividend rewards on an increasing basis. And that’s actually been a very successful strategy for her and for others in our equity division.

It's worked really well in the global markets, where I think overseas, as compared to a well-established market like the U.S., you see a little bit slower adoption of shareholder-friendly practices like growing dividends. We have the kind of research on the ground in a lot of those countries and lot of those markets, with Ramona being the key quarterback of the process in her role in this fund, to be able to identify those companies that are beginning to wake up to generating more shareholder value through the growing path of dividends.

Wolf: And I think it speaks to a broader point about not only Fidelity's Global Monthly Income Fund, but actually the suite of funds that we're responsible for here in Canada. We very much operate on a division of labor principle. So Geoff and I are the lead managers on Global Monthly Income and many of these other strategies. Our responsibility is the fund as a whole, and in particular the asset allocation that goes on in the fund, but our area of expertise is not stock picking, it's not putting together bond portfolios, et cetera. We have, as Geoff alluded to, fantastic capabilities, whether it'd be global, U.S., Canada or elsewhere. People who every day are turning over the rocks, who are looking for the best companies, the best prospects, et cetera.

So in a sense, it would actually be kind of silly for us to pick stocks when that’s not our expertise. It’s Ramona's and others. So we very much have this division of labor, where we are doing what we are good at, which is the top-down asset allocation, and Ramona and others are doing what they're good at, which is what they do every day: picking stocks, whether it'd be globally, in EAFE, the U.S., et cetera. We think that everybody is sort of sticking to what they are good at. It’s actually a very powerful and effective way to manage these funds. Because you can get diverse sources of alpha for people concentrating on their particular areas of expertise.

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About Author

Jess Morgan

Jess Morgan  Jess Morgan is the associate editor of Morningstar Canada’s website. She began her career as a television producer and freelance writer, often making appearances on TV and radio as a commentator on politics and culture. She holds a BA in communications from the University of Winnipeg and a diploma in Creative Communications from Red River College.

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