MSV seminar on Fidelity Funds

Middlesea Valletta Life (MSV) recently organised a seminar for intermediaries involved in the promotion of MSV's unit-linked range of life insurance products.

The seminar focused on a selection of Fidelity International Funds available to MSV clients under unit-linked products.

The funds chosen for the seminar were the Fidelity Funds Euro Bond Fund, European Growth Fund, India Focus Fund and European Aggressive Fund

The seminar was intended to disseminate fund-specific knowledge to the intermediaries so as to further raise their competence and ability to guide existing and potential customers.

The information was provided by means of a teleconference by the respective fund managers/ senior fund representatives with the aid of visual presentations.

Fidelity Funds - Euro Bond Fund

The Fidelity Funds Euro Bond Fund is one of the most popular fixed-income funds selected by MSV unit-linked policyholders. The fund invests its assets primarily in both government and non-government bonds issued in countries that are members of the European Monetary Union and primarily denominated in euro.

A large proportion of the fund, usually around 90 per cent, is invested in investment grade bonds, with a significant portion, usually more than 50 per cent, invested in AAA rated bonds - the highest S&P credit rating.

Investors in this fund benefit from a high quality and security of investments, an excellent track record with an annualised growth of seven per cent since the fund launch date (on October 22, 1990) and a consistent first quartile ranking. The fund enjoys a five-star and AA rating from Standard & Poor's.

Paul Lavelle, the fund manager, explained how, despite the current environment of low yields, low volatility and tight corporate spreads, he is still finding opportunities for investment and achieving relative performance.

A large part of the success of the fund is due to the vast resources that Fidelity possesses, Mr Lavelle emphasised, giving examples of current opportunities, such as high conviction trades, exposure to convertibles, yield-enhancing trades and inter-market trades.

Fidelity Funds European Growth Fund

The European Growth Fund is one of the most popular equity funds selected by MSV unit-linked policyholders. The fund aims to achieve long-term capital growth by investing in an actively managed portfolio of primarily pan-European equities.

The fund has a bias towards small and medium-sized companies because the manager believes these stocks have a greater potential to be undervalued, as they tend to be less intensively researched by other investors. The size of the fund, €24.4 billion (as at February 28, 2006), is a strong indicator of its success.

The fund has an excellent track record with an annualised growth of 14.8 per cent since the fund was launched (on October 1, 1990) and consistently outperforms its benchmark, the FTSE Europe Index. It also enjoys a five-star and AA rating from S&P's, as well as a consistent first quartile ranking.

Graham Clapp, the portfolio manager, provided the audience with an update on the investment process of the fund, the investment backdrop of the market as well as a review of the fund profile and its positioning.

He explained how the investment decisions taken by the fund manager are based on information obtained from internal research carried out by Fidelity, company meetings, discussions with other Fidelity fund managers, broker research, news and other external data sources.

He also dwelt on the opportunities and challenges in the current investment background - economic growth in developing countries, such as China, India and Russia; European Union enlargement; uncertain economic prospects in OECD countries; and the oil shock.

Mr Clapp then reviewed some fund attributes, such as sector and geographic distribution, market capitalisation relative weighting and finally fund performance relative to its peers.

Fidelity Funds India Focus Fund

The India Focus Fund is relatively new, having been launched in August 2004. It aims to provide long-term growth, principally through investment in equity securities listed in India, as well as non-Indian companies that derive a significant portion of earnings from India.

The fund manager favours companies with the potential to deliver superior earnings growth, in particular either emerging growth or unrecognised growth. The fund has registered a cumulative growth of 123.9 per cent (equivalent to an annualised return of 70.1 per cent since its launch).

Arun Mehra, head of Investment Strategy with Fidelity International India, provided a review of the Indian equity market and of the fund itself. Over the past couple of years the Indian equity market has been a star performer among Asian markets.

A combination of improving macro fundamentals, corporate sector resurgence and buoyant global liquidity has seen a close to 100 per cent rise in the market. Foreign buying interest has been a feature of the market, with net inflows of US$23 billion over the past three years.

Mr Mehra emphasised his view that the big picture of the Indian market is a long-term secular growth story in its nascent stages.

He described the extensive research infrastructure (both local and global) available to the fund, how he obtains information from analysts in Mumbai, Delhi and Hong Kong, supported by Fidelity's 254 equity research professionals globally.

The fund has a small and mid-cap bias that forms the basis of long-term core holdings but it will also look to invest in quality large caps when valuations are appropriate. The fund is positioned to capture opportunities from rises in domestic consumption and the infrastructure cycle, and other opportunities in financials and emerging companies.

Fidelity Funds European Aggressive Fund

The European Aggressive Fund aims to achieve long-term capital growth from a portfolio principally invested in the shares of pan-European companies. The fund manager screens for companies that appear cheap relative to their peers and their business fundamentals, focusing on three key areas: turnarounds or recovery situations, unrecognised growth potential and opportunities for corporate activity.

The fund has registered an annualised growth of 8.2 per cent since launch (on February 20, 1998), enjoys a five-star rating from S&P's and has also achieved a consistent first quartile ranking.

The fund manager, Sanjeev Shah, described the fund as a "go-anywhere fund" with its holdings ranging from small to mid-cap to large-cap stocks. Being aggressive, the fund focuses on absolute returns and has a high level of active money.

A flexible approach is adopted, with a top-down overlay to portfolio construction, even though overall stock selection generates 80 per cent of alpha (fund performance above its benchmark) and the top-down theme driven allocation generates only 20 per cent.

Currently, Mr Shah sees three areas where opportunities emerge:

1. Stock selection among growth stocks - the media and pharmaceutical sectors;

2. Stock selection among large-cap stocks - the real estate sector; and

3. Stock selection within the energy sector - the oils sector.

As part of the investment process he actively screens for stocks with an absolute upside greater than 20 per cent and then appraises the value of the business, taking into account issues such as market structure, levels of competition, regulation, management as well as sales and margin drivers.

Strong demand for MSV unit-linked products

MSV's unit-linked product range offers customers a wide variety of choice, both in product choice and underlying investment fund choice. The entire range of products can satisfy the needs of customers irrespective of whether they wish to invest

¤ cautiously or in an adventurous manner;

¤ on a regular basis or on a single premium, one-off basis;

¤ in Maltese or international assets; or

¤ in Maltese currency or foreign currency products.

With the choice of funds, one may also combine flexible life cover (that comes in handy for personal protection or as security against a bank loan) conveniently and cost-effectively under one plan.

Strong demand for these plans has resulted in an increase of 100 per cent in 2005 (over 2004) in the funds under management generated by MSV's unit-linked range of products.

For more information on these products contact any licensed MSV intermediary, visit the offices of Middlesea Valletta Life in Floriana, call free on 8007-2220 or e-mail info@msvlife.com.

Investment returns can go down as well as up and past performance is not necessarily a guide to future performance. Changes in the rate of exchange of currencies may also affect the value of your investment. MSV is authorised to carry on long-term business under the Insurance Business Act, 1998, and is licensed to provide investment services in terms of the Investments Services Act, 1994, in relation to Linked Long Term Contracts of Insurance. All fund information reported is that applicable as at February 28.