Fund of the Fortnight: Fidelity MoneyBuilder Dividend
The launch of Neil Woodford’s Woodford Equity Income fund attracted headlines and investors in equal measure in 2014. Whilst Woodford’s reputation is well-deserved, what was lost in the hype is that there are similar, less well-known managers who are perhaps just as talented. One of these is Michael Clark, who runs the Fidelity MoneyBuilder Dividend fund.
Clark joined Fidelity as a research analyst in 2002, graduating to a portfolio management role in 2007. However, he is far more experienced than this suggests, having previously worked in analyst roles for JP Morgan, Enskilda and Morgan Grenfell from 1986. He also has an MA in Economics from Cambridge University.
Clark invests mainly in large and mid-sized UK equities, though he also takes advantage of the flexibility to invest up to 20% in overseas stocks – his portfolio currently includes US tobacco-maker Altria and Sanofi, the French pharmaceutical business.
Clark has one of the more conservative investment styles in the peer group – Fidelity has described this as “Growth of Income at a Reasonable Price”. He targets companies with understandable business models and predictable cashflows that are able to deliver sustainable dividends. He also avoids gearing, preferring companies with strong balance sheets.
Clark took over Fidelity MoneyBuilder Dividend, then known as Fidelity Income Plus, in July 2008, throwing him right into the heat of the banking crisis. It was a test he came through with flying colours, outperforming the FTSE All-Share benchmark substantially going into 2009. However, he then underperformed substantially in 2009, with his defensive style proving out of kilter with the racier stocks that led the way in the market bounceback.
This pattern of returns typifies Clark’s style. His approach typically leads the fund to provide low volatility returns and a degree of protection from falling markets, and whilst he can lag in rising markets, over his career Clark has provided benchmark-beating performance.
Clark’s style typically leads him to favour certain industries. He has been a longstanding fan of healthcare stocks, currently holding not only GlaxoSmithKline and AstraZeneca but also their Swiss rivals Novartis and Roche. He also has substantial overweights to the more defensive utilities and consumer goods sectors. By contrast he is largely avoiding the typically riskier names in the mining industries and is underweight oil & gas, though BP and Royal Dutch Shell are both top ten holdings. Financials is another underweight, though given its importance in the UK stockmarket he still has substantial exposure.
The UK Equity Income sector is a longstanding favourite with investors, but with many of the UK’s dividend-paying companies now found in more volatile industries it may be riskier than it has been historically. Fidelity MoneyBuilder Dividend’s more cautious approach to the asset class therefore provides a valuable option to investors, and one that so far has been successful. In this post-RDR world it is also worth highlighting that the fund’s charges are low – with an OCF of 0.67%, it is one of the cheapest in its peer group.