Fidelity’s Bateman: Investors must be ‘braver for longer’

Fidelity’s James Bateman contemplates the potential end of the decade-long bull market and explains why he still considers equities to be more attractive than fixed income, despite the challenging landscape.

Equity fund sales in US hit record $58bn


When James Bateman joined Fidelity six years ago, the multi-asset franchise’s philosophy was about combining equity multi-managers with strategic benchmarked strategies. In other words, a more traditional approach of utilising funds of funds or managers of managers, seeking to outperform a 60/40 benchmark through pure alpha.

Since then, this has shifted from what Bateman terms “old generation to new generation” multi-asset, and with it the demand for income solutions has ballooned. As such, client demands have moved from expecting a portfolio to outperform a fixed benchmark by 1-2% to a more income-focused solution based around the common query: ‘I have an outcome requirement that is multi-dimensional and I need your help to get there’, according to Bateman.

“That is about requiring a sustainable and natural level of yield from investment with broad capital stability and/or capital that keeps up with inflation, with a real focus on short-term drawdown,” he says.

In 2012, Fidelity’s multi-asset income franchise had $175m under management, but that has grown to an impressive $8bn. In his role as chief investment officer of multi-asset, Bateman heads up the investment processes and manages the investment team, which comprises 18 portfolio managers and a team of research analysts split into three areas: manager research, market research and quantitative research. The team has five core franchises: multi-asset income, tactical total return, volatility targeted, risk-rated multi-asset and open architecture.

The firm has made several key hires in the past 18 months, including former Janus Henderson head of multi-asset Bill McQuaker to manage the Multi-Asset Open range and, more recently, Chris Forgan, also Janus Henderson alumni, as a co-portfolio manager in the franchise led by Eugene Philalithis. It also shipped co-portfolio manager George Efstathopoulos to Hong Kong to broaden its geographical diversity.

High profile

In the income space, Fidelity aims to deliver a drawdown profile that looks similar to government bonds but targets a yield and total return in excess of government bonds through diversification and tactical asset allocation. Central to this, Bateman asserts, is the open-architecture strategy managed by McQuaker.

“Historically, we have run open-architecture multi-asset as a five-asset class benchmark that we tried to outperform. I felt clients wanted something a bit more difficult to achieve – they want an absolute level of volatility and they want us to maximise the return by being as dynamic as possible and not pigeonholing asset classes.”

As a result, the firm had to build flexibility into its process and not anchor itself to a benchmark. Managers are given free rein over their portfolios, meaning they take every decision independently. This is despite Fidelity having a house view on key asset classes, formed on a monthly basis by the senior investment professionals.

Bateman says: “We are firmly in the camp of giving portfolio managers full responsibility as I think that is the way to maximise total return. Otherwise, you find portfolio managers ignoring positions that are basically collective views because they do not feel ownership of them.”


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