Asset Manager Overview
Fidelity International was established in 1969 as the international investment arm of Fidelity Investments, which was founded by Edward C. Johnson II in 1946 in Boston. It is a privately-owned company and operates globally (excluding the U.S.), providing investment solutions for institutional and individual clients across the equity, fixed income, multi-asset, and real estate markets.
Fund Manager/Team Overview
The investment of these passive strategies is carried out by Geode Capital Management, based in Boston, Massachusetts. Geode is an independent institutional manager that was founded within Fidelity Investments (Fidelity's U.S. company) in 2001 and became independent in 2003. Geode has a strong support infrastructure for equity index investing, managing over $1.7 billion across more than 85 different global exchanges. Fidelity International oversees the funds from an administrative, regulatory, and compliance perspective.
Investment Philosophy & Process Overview
The fund invests in physical securities and follows a full replication approach. A full replication approach, as the name suggests, involves purchasing all the securities in the same weights as they are represented in the index. In principle, this sounds very straightforward, but there are subtle differences in the way corporate actions, such as dividends and changes to the index composition, are handled. The impact of these differences on performance is small, and this is captured in our analysis of the fund's returns.
This approach, gross of fees, can provide the highest degree of accuracy in tracking the fund's benchmark. However, it can also involve higher transaction costs compared to other methods and is therefore more suitable for liquid markets.
The fund is priced and traded at 12:00pm. If the underlying market is closed, a fair pricing adjustment may be applied to align the fund with the expected price of the tracked index. Most of the time, fair value adjustments have no material impact on the fund's pricing operations. However, occasionally, when a market is closed, an event may occur that would materially impact prices. This was the case in February 2022 when Russia's invasion of Ukraine led to the suspension of all Russian stocks to international investors. Therefore, a fair price adjustment was applied by valuing all Russian securities at zero.
The fund is priced at a different time than the benchmark, which can slightly increase the tracking error and lead to notable differences in performance if there are market moves between when the fund and the benchmark are priced. This difference should then be eradicated the following day.
This fund operates with a partial swing pricing policy, which means that units are typically bought and sold at the same price. However, the fund can apply a small spread if the daily inflow or outflow exceeds a certain threshold. This involves adding (in the case of heavy inflows) or subtracting (in the case of heavy outflows) the costs of creating or cancelling units in the fund. Consequently, incoming or exiting investors will bear these costs rather than the current investors. This spread is sometimes referred to as an anti-dilution levy and is intended to prevent arbitrage investing. We consider this policy to be reasonable, as it protects the interests of investors who continue to hold the fund.
The fund does not undertake any stock lending activity.
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