Fidelity MoneyBuilder Income: April 2020 fund update

Joseph Hill | Thu 30 April 2020

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• Managers Sajiv Vaid and Kristian Atkinson are a duo with plenty of experience
• The fund is managed conservatively, so could fall less than other bond funds when times are tough
• It has the potential to deliver a steady monthly income

How it fits in a portfolio

The fund aims to provide a relatively steady income and a small amount of growth, without taking excessive risks. It could help diversify a portfolio focused on shares, or be used as a way to help limit volatility during tougher times for stock and bond markets.

Manager

The fund is co-managed by experienced duo Sajiv Vaid and Kristian Atkinson. Sajiv joined Fidelity from Royal London Asset management in 2015 and has over 22 years of experience managing fixed income funds. Meanwhile Kristian joined Fidelity in 2000 and has over 19 years investment experience. We like the fund managers' relatively conservative approach.

Vaid and Atkinson benefit from Fidelity's extensive in-house research team to help them put together the portfolio.

Vaid and Atkinson both manage other bonds funds too, but they’re supported by a well-resourced fixed income team at Fidelity, so we feel they can comfortably handle their other responsibilities.

Process

Most bond managers analyse the bigger economic picture and Sajiv Vaid and Kristian Atkinson are no different. But we also think a particular strength of the team is their skill at analysing bond-issuing companies. It helps them to determine which are the most attractively priced and should be included in the fund. The managers can invest overseas but you should expect the fund to retain a strong UK bias.

Sajiv and Atkinson aim to provide a decent level of income, offer some stability in turbulent times, and perform differently to funds focused on shares.

The portfolio includes collateralised debt, where borrowers have to post security for a loan in the same way you might use a house as collateral for a mortgage. The investor has something to rely on if the borrower doesn't pay money owed to bond holders. This differentiates the fund from some other bond funds.

The managers also make use of their ability to invest in lower-risk government bonds and can invest in derivatives which if used adds risk. The fund is well diversified, so no single area should have a significant negative effect on performance.

They think this will help deliver excellent long-term performance and see the fund through tougher times. In the current low interest rate environment, the managers think investment grade bonds could be the sweet spot, offering the potential for a good income but keeping risks under control. Unlike cash which is guaranteed, the value of this fund and the income generated could fall as well as rise so investors could get back less.

Culture

Fidelity is privately owned, this independence should mean it can focus on the long-term interests of investors rather than short-term shareholder demands. The managers are incentivised based on the longer-term performance of the fund. We think this is a positive as it aligns their interests with those of their investors. They do well when their investors do well.

The team also consider ESG issues when researching individual companies and bonds. They think these factors have the potential to affect the long term value of the investment and believe high standards of corporate responsibility make good business sense.

Cost

The fund has an ongoing charge of 0.56%, but we’ve secured HL clients an ongoing saving of 0.2%. This means you’ll pay a net ongoing charge of 0.36%. The fund discount is achieved through a loyalty bonus, which could be subject to tax if held outside an ISA or SIPP. The HL platform fee of up to 0.45% per year also applies.

Performance

Sajiv Vaid has an impressive track record of managing corporate bond funds over a period that stretches back to 2002. We think he's performed very well, delivering strong returns for investors. Over the course of his career, Vaid has delivered a return of 122.2%* to investors, compared with a return of 101.0% for the funds IA sterling corporate bond peer group. Past performance is not a guide to future returns.

The fund has also held up reasonably well compared to some of its peers in the corporate bond sector so far this year, although it has still delivered a negative return. The managers were wary heading into 2020 due to stretched valuations in the market and positioned the fund defensively as a result. This included over weights in more defensive sectors like utilities.

Sajiv Vaid Career Track Record

Past performance isn’t a guide to the future. Source: Hargreaves Lansdown to 14/04/2020

The mangers are relatively cautious investors anyway, so the fund is managed conservatively with more of the fund invested in companies less likely to default on their debts. This means it could lag behind the benchmark during good times, but could make up for this by providing some shelter when markets fall.

Five year performance

Past performance is not a guide to the future. Source: *Lipper IM to 31/03/2020.

Find out more about this fund including charges

Key investor information