Fidelity is making a bet that emerging economies are going to pay off big. The Boston Behemoth has launched a Fidelity Emerging Europe, Middle East and Africa (EMEA) Fund. The fund will be available in retail and adviser share classes.
As the market cap of emerging-market companies has grown nearly 12 fold over the last 10 years relative to other global stock categories, individual investors and financial advisers increasingly are considering regional funds as potential building blocks of a diversified investment portfolio. Fidelity Investments has launched a new international equity fund — Fidelity Emerging Europe, Middle East, Africa (EMEA) Fund — with retail and adviser share classes.
“Emerging markets have grown significantly in recent years, and – if long-term growth forecasts are accurate – these markets could advance beyond the 12% share of the global equity market that they now comprise,” says Sanjiv Mirchandani, president, Fidelity Personal and Workplace Investing Growth Business. “By launching a first-of-its-kind equity fund for U.S. investors dedicated to emerging Europe, Middle East and Africa markets, we’re working to help those with high risk tolerances and long-term outlooks gain targeted exposure to areas of the world that may be under-represented in their portfolios.”
Fidelity EMEA Fund seeks capital appreciation and normally invests at least 80% of its assets in securities of emerging Europe, Middle East, and Africa issuers and other investments that are tied economically to the EMEA region. The fund compares its performance to the MSCI Emerging Markets Europe, Middle East and Africa (MSCI EMEA) Index.
EMEA forms a contiguous region that combines more than 80 countries beginning with Russia in the East, continuing through Eastern Europe and the Middle East, and encompassing the entire African continent. The EMEA region includes more than 1.5 billion people who represent one of the fastest growing and rapidly urbanizing populations in the world. In addition to its significant human capital, the region contains the majority of the world’s proven oil reserves and natural resources.
Adam Kutas, a 12-year Fidelity veteran who previously co-managed Fidelity Latin America Fund, manages the fund from Fidelity Management and Research Company’s London office.
“At Fidelity, we’ve been carefully tracking the emergence of the EMEA region as a potential investment thesis for several years. “A few factors have combined to give us confidence that, indeed, EMEA represents a bonafide investment opportunity for certain clients. First, there is an ever-growing number of EMEA companies with solid earnings growth that, importantly, now represent significant market capitalization. Second, we’ve found that many of these EMEA companies are under-researched and under-followed by investors. And third, we’ve assembled a dedicated team of analysts here in London that provides us with extensive resources to closely cover the region across its many different market sectors, including energy, financials, telecommunications, materials, and health care, among other,” says Kutas. “We’re excited to provide U.S. investors and advisors with the first equity mutual fund dedicated to this fast growing area of the world.”
Kutas adds that the long term macro trends in the EMEA region – global demand for oil and natural resources, rapid urbanization, infrastructure investment and consumer growth – offer substantial growth opportunities over the long term.
“The combined economic potential of the EMEA region is often obscured by the relatively small market capitalization of the region’s stock markets. As a result, it is often under represented in many broad international and emerging market investment portfolios,” adds Kutas. “We see the EMEA Fund as a viable investment option for long-term investors and advisors who are seeking portfolio diversification and who already have a diversified international portfolio, as the EMEA region has historically tended to exhibit a low correlation to the U.S. and developed markets, and also has had low inter-market correlation.”
“Countries in the resource-rich EMEA regions have attractive demographics and experienced strong economic growth in recent years, providing potential for long-term growth opportunities,” says Martha B. Willis, executive vice president, Fidelity Investments Institutional Services. “The launch of our new EMEA fund expands the Advisor mutual fund product line by providing advisors with another solution to help their clients achieve the appropriate international diversification with targeted regional exposure in an exciting growth area of the world.”