Fidelity Worldwide to sever ties with US research arm
Fidelity Worldwide Investments (FWI) is hiring a team of in-house US analysts as it prepares to sever ties with its Boston-based research arm.
Dominic Rossi (pictured), the firm’s global CIO for equities, is set to recruit a total of 17 investment professionals over the next year as FWI becomes an entirely separate entity from Fidelity Management and Research (FMR).
The two groups first split apart in 1979 when Fidelity International Limited (FIL), now known as FWI, became a legal entity independent from FMR. The two businesses will soon cut their remaining ties, Investment Week understands.
Consequently, FWI’s portfolio managers investing in the US market will no longer have access to analysis from the Boston team, and the firm will have to develop an in-house capability to fill thiscoverage gap.
The group has already begun beefing up its team of in-house fixed income analysts where previously it was using research from the US team.
Equity analysts from the European and Asian desks have also started moving across to cover the US market, and more hires will follow by the year end.
Fidelity has been building its global team over the last year, hiring Jeremy Podger from Threadneedle; Richard Lewis, formerly of New Star; and Aviva Investors’ Dan Roberts.
During last month, FIL Investments International replaced FMR as the investment adviser of the Hong Kong registered Emerging Market Debt fund, paving the way for other funds to follow suit.
Tom Stevenson, investment director at Fidelity, said: “We have progressively built out our research base and use proprietary research to support nearly all our investment strategies. As companies develop, their needs change, so it might become more appropriate to do things in-house.”
However, he said the move will not affect the research capability for the group’s US funds because it will continue to leverage off FMR’s research until a new team is in place.
“The sharing of research between FIL and FMR is on an arm’s length and commercial basis. We will not cease purchasing research from FMR without having the capability in-house.”
S&P Capital IQ’s US analyst Simon Dorricott suggested although the move will lead to short-term upheaval, it could be positive for the group in the longer term.
“It is obviously a difficult situation Fidelity has got itself into, but it is not unique. Capital International went through the same thing,” he said.
“They will lose a significant resource, but it does alleviate the issue of liquidity, especially in terms of mid-cap growth names where the managers might have had difficulties exiting if everyone is following the same analysts’ calls.
“It will take time for the new analysts to get up to speed on stocks they are covering. But if Fidelity gets 17, which is the target, it will give them a fighting chance to have a seamless transition. We are talking to the global and US managers to see how the new team is bedding is as time goes by,” he added.
Fidelity’s flagship US portfolio is the £1bn American fund, managed by Aris Vatis, while the popular £1.3bn Global Special Situations fund, managed by Podger, and Roberts’ Global Dividend fund are key products in its global equities offering.
This article was first published on Investment Week