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Fidelity Index World: June 2020 fund update

Jonathon Curtis | Tue 30 June 2020

Investments can go down as well as up so there is always a danger that you could get back less than you invest. Nothing here is personalised advice, if unsure you should seek advice.
  • The fund is run by a highly experienced team of passive fund specialists
  • They’ve done an excellent job of closely tracking the developed global stock market
  • The fund is a low cost way to gain broad international exposure
  • This fund has been added to our Wealth Shortlist of funds chosen by our analysts for their long-term potential

How it fits in a portfolio

Index tracker funds, or ‘trackers’ are a convenient and low-cost way to achieve lots of diversification. By tracking the whole of the developed world stock market, this fund provides exposure to lots of different countries and companies. That means it could be a useful option for adding international diversification to a more UK-focused portfolio, or a simple way to form the equity foundation of a portfolio.

Manager

Fidelity launched this fund is December 2012 and appointed Geode Capital Management – a specialist provider of index trackers – to manage the investments. Geode began in 2001 as a division of US-based Fidelity Investments and became an independent, private company in 2003. It has become a large company, with around $500bn invested and has a well-resourced team of experienced investment professionals. Portfolio managers have on average over two decades of experience.

While Geode manages the investments, Fidelity International Limited is ultimately responsible for the fund. They handle the sales, marketing, compliance and regulations functions. While not the usual arrangement for passive providers, we think the Geode’s scale and passive investment specialism combined with Fidelity’s operations and commercial expertise is a good partnership.

Process

The fund aims to copy the developed global stock market, which is made up of large and medium-sized companies from countries such as the US, Japan and European countries including the UK. The fund aims to fully replicate the index by investing in virtually all 1,600+ companies, although sometimes the smallest positions aren’t included for efficiency and cost-savings. The biggest portions of the portfolio are currently the technology and healthcare sectors.

The size and recent strength of the US stock market means it dominates the global stock market and therefore the fund. American companies make up roughly two-thirds of the portfolio, and nine of the top ten stocks. This is something to be aware of, given how much of the fund’s fortunes are tied to the US market rather than the rest of the world.

It’s often thought that index tracker funds are run by a computer buying and selling shares on auto-pilot, but this isn’t the case. There’s a lot more management going on behind the scenes. The team at Geode works out how to make the necessary changes to the portfolio in the most efficient and cost-effective way, and also has to decide how to handle corporate action events such as dividends, rights issues, mergers and acquisitions.

They also try to make up for the things that detract from performance that the index ignores such as withholdings taxes, dealing commissions and spreads, and the cost of running the fund. While they’re able to lend stocks for a fee to help make up for lost performance, they don’t currently. They can use derivatives to help them invest, which adds risk if used.

Culture

Fidelity International is a large asset manager that’s best known for its range of actively-managed funds. It’s got a relatively small ‘passive’ funds presence in the UK, having had just one index tracker until 2012 and offers a current range of seven funds. The size of the company and the funds themselves though means they have the scale to run them efficiently and cost-effectively. As a privately-owned business, Fidelity is able to maintain a long-term view without short-term shareholder demands, which we think is a positive for any investment business.

Cost

The fund is available for an annual ongoing charge of 0.12%. This is among the lowest charges of global tracker funds, and we think is very good value for a well-run fund. Our annual platform charge of up to 0.45% also applies.

Performance

The fund has tracked the developed global stock market very closely since it launched in 2012. Sometimes the fund has fallen slightly behind, and at other times it’s even been slightly ahead, although investors shouldn’t count on the latter happening. Over the long-term though, it’s done its job well. Given Geode’s scale, which enables it to keep costs down, and track record of closely following the index, we’d expect this to continue over the long-term, although this is not a guide to the future.

Fidelity Index World performance since launch

Past performance is not a guide to the future. Source: Lipper IM to 31/05/2020

Annual percentage growth
May 15 -
May 16
May 16 -
May 17
May 17 -
May 18
May 18 -
May 19
May 19 -
May 20
Fidelity Index World -0.2% 32.6% 8.2% 5.1% 9.1%
FTSE World 0.6% 33.0% 8.7% 5.1% 8.5%

Past performance is not a guide to the future. Source: Lipper IM to 31/05/2020

More on Fidelity Index World, including charges

Fidelity Index World Key Investor Information

Important information - Please remember the value of investments, and any income from them, can fall as well as rise so you could get back less than you invest. This article is provided to help you make your own investment decisions, it is not advice. If you are unsure of the suitability of an investment for your circumstances please seek advice. No news or research item is a personal recommendation to deal.


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