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Fidelity Enhanced Income

Elite Rated by FundCalibre

This fund aims to provide an income over and above what you might expect from most other equity income funds. The managers will look to trade some of the potential capital growth, in return for additional income. In this endeavour the managers have been successful in providing an attractive income, while preserving capital.

Company Description

Fidelity International is a financial services corporation established in 1969. With offices in more than 20 countries, its product range spans mutual funds, defined contribution pensions, segregated portfolios and multi-manager offerings. It compensates managers on long-term performance, illustrating its intention to align interests with clients.

Factsheet_fidelity_international_logo

Fund Manager

Michael Clark and David Jehan have co-managed the fund since launch in early 2009. Michael has over 25 years of industry experience and also manages the Fidelity Income Plus fund. David also has 20 years of industry experience and he is responsible for the income-enhancing strategy.

Factsheet_clark_michael_2008

With a 4% yield and a growing dividend we aim to deliver 7% return per year. At that rate you'll double your money in ten years.

Michael Clark - Fund Manager

The Investment Process

The managers will construct a portfolio of predominantly dividend-paying, large-cap UK equities. The emphasis is on companies that can grow their dividend sustainably, so cyclical stocks are avoided. To enhance the yield of the portfolio they will sell special contracts on certain portfolio stocks that pay them an income, in return for some of the potential capital growth.

Risk

The fund has lower a risk profile than the UK stock market, which in part reflects the underlying portfolio companies but also the impact of the income-enhancing strategy, which has the effect of smoothing returns. The fund will underperform strongly rising markets.

Our Opinion

This fund has an interesting process with few direct competitors. The enhanced income strategy does reduce the total return, but also the volatility of the fund. Consequently, we think that reasonably cautious investors, whose primary concern is a higher income, could find this fund an attractive option.

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©2014 FundCalibre Limited. All Rights Reserved. The information, data, analyses, and opinions contained herein (1) include the proprietary information of FundCalibre, (2) may not be copied or redistributed without prior permission, (3) do not constitute investment advice offered by FundCalibre, (4) are provided solely for informational purposes and therefore are not an offer to buy or sell a fund, and (5) are not warranted to be correct, complete, or accurate. FundCalibre shall not be responsible for any trading decisions, damages, or other losses resulting from, or related to, this information, data, analyses, or opinions or their use. The Elite Fund rating is subjective in nature and reflects FundCalibre’s current expectations of future events/behaviour as they relate to a particular fund. Because such events/behaviour may turn out to be different than expected, FundCalibre does not ,guarantee that a fund will perform in line with its FundCalibre benchmark. Likewise, the Elite Fund rating should not be seen as any sort of guarantee or assessment of the creditworthiness of a fund or of its underlying securities and should not be used as the sole basis for making any investment decision. FundCalibre disclaims any responsibility for trading decisions, damages or other losses resulting from any use of the Elite Fund rating.