Fidelity MoneyBuilder Income - Change well managed

• Ian Spreadbury has stepped down as the fund's co-manager
• Sajiv Vaid, the other co-manager, is now taking a lead role
• This fund's still one of our favourites ways to invest in UK corporate bonds

Our view

We think Fidelity MoneyBuilder Income is a great choice for broad exposure to UK corporate bonds.

Sajiv Vaid took over as the fund's lead manager at the end of December 2018. Ian Spreadbury, a bond market veteran, stepped down as co-manager and retired from fund management at the same time.

Spreadbury implemented the fund's long-term process when it launched in 1995 and did a great job for investors. It's always disappointing to see such a valuable member of a team leave. But we think he's left the fund in capable hands. Vaid co-managed the fund since 2015 and has a track record that goes back to 2002. He also has the support of new co-manager Kristian Anderson and Fidelity's extensive team of bond analysts.

Vaid maintains the fund's existing philosophy and process, which we view as a positive. He uses a conservative approach to bond investing and aims to provide a steady income with a small amount of growth. We think the fund is a good choice for generating an income, or it could be used to diversify a portfolio focused on shares. The fund features on the Wealth 50 list of our favourite funds.

We’ve recently negotiated a further discount on the fund’s ongoing charge, now 0.36% a year for HL clients. Our platform fee of a maximum of 0.45% a year also applies.

Performance

Sajiv Vaid has built a great long-term track record and we think he'll do well for investors over the long run. Past performance isn't a guide to future returns.

Sajiv Vaid's career track record

Past performance is not a guide to the future. Source: Hargreaves Lansdown/Lipper IM 31/05/2002 to 31/12/2018

The fund did slightly worse than the average fund in the IA £ Corporate Bond sector over the past year though. The fund's invested in a way that means it's a bit more sensitive to changes, or expected changes, in interest rates than some others in the sector. So this held back performance for the year.

Over the longer term we expect the fund to hold up better in weaker markets. This won't happen every time, but we think the managers' conservative style will come into its own when markets go through a particularly tough time. In the meantime Vaid tries to pay investors a steady income. The fund's current yield is 3.3%, though this isn't guaranteed and is not a reliable indicator of future income.

Past performance is not a guide to the future. Source: Lipper IM to 31/12/2018

Outlook and positioning

The managers think it’s time to be cautious.

Quantitative Easing (QE), which was put in place following the financial crisis, has pushed up bond prices over the past decade. It means prices might not have much room to grow from current levels. QE was also intended to help stimulate economic growth. It's been moderate since, but not as high as many hoped.

The managers have increased investments in the bonds of companies that are less reliant on the strength of the economy for success. For example, they see utility companies as a safer option because people need their products and services regardless of how the economy is doing.

The fund mainly invests in UK corporate bonds, though the managers have the ability to invest part of the fund in bonds issued outside the UK. They think there's more value in UK bonds at the moment, so they recently reduced their overseas investments. Derivatives are used to provide shelter from currency movements but the use of derivatives increases risk.

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