HEAD-TO-HEAD: Fidelity vs JPMorgan

Added 24th June 2016

Fund Selector Asia compares two European equity funds – the Fidelity European Larger Companies Fund and the JPM Europe Dynamic Fund.

HEAD-TO-HEAD: Fidelity vs JPMorgan

The United Kingdom has voted to leave the European Union, pushing the sterling to a 30-year low and sending shockwaves through global markets. 

In particular, UK equities are likely to have more selling pressure, said Luke Ng, senior vice president of research at FE Advisory.

Against this backdrop, Fund Selector Asia compares two European equity funds – the Fidelity European Larger Companies Fund and the JPM Europe Dynamic Fund.

Ng provides a comparative analysis. 

Investment Strategies

Both funds are set up as open-end investment products domiciled in Luxembourg and they primarily invest in European equities, including UK equities, and they both use the MSCI Europe index as their benchmark, Ng said.

The Fidelity fund tends to focus on companies with stronger and more defensible advantages versus competitors in terms of branding, scale or technology, Ng said. 

The product also has a core focus on large-cap stocks, and it tends to have stronger weightings in UK equities relative to its benchmark, Ng said.  

“Overall, the fund tends to offer better downside protection when the market is volatile, but it could lag behind during cyclical rallies.”

By comparison, the JPM fund aims to invest in companies based on value, quality and momentum. Value refers to the current prices of the stocks relative to the market levels, while quality means businesses with healthy balance sheets, he said.

In addition, the JPM team’s selection of securities focuses on momentum, he said.

“Momentum is viewed as a form of behavioral finance that takes into account investors’ bias to identify opportunities, which tend to perform better throughout various economic cycles.”

Similar to the strategies of the Fidelity fund, the JPM fund also has a strong focus on large-cap stocks, but it has lower weightings in UK equities versus its benchmark, Ng said. 

“With momentum being a key factor in portfolio construction, the fund tends to have a higher price swing than that of the European equities in general, and it performs better in times when there is an uptrend in the broader market, and vice versa in a downtrend.”

Region Weightings

Fidelity  JPM %
Europe ex-UK  61.30  European equities  71.60 
UK 37.80 UK Equities 21.50
Money Market 0.90 Money Market


Source: Funds' factsheet, FE Analytics

Sector Weightings

Fidelity  JPM 
Consumer Products  28.10  Consumer Products  28.30 
Health Care 18.40 Financials 21.60
Financials 18.30 Basic Materials  13.10
Basic Materials 13.00 Industrials 12.10
Industrials 11.20 Health Care 9.20
Telecom, Media and Technology  8.50 Money Market 6.90
Utilities 1.60 Telecom, Media and Technology  6.30
Money Market 0.90 Utilities 2.50

Source: Funds' factsheet, FE Analytics




Given the different strategies of the two funds, the JPM fund significantly outperformed the Fidelity fund and the benchmark index throughout the market rally from 2012 to 2013, Ng said. 

On the other hand, the JPM fund has underperformed both the Fidelity fund and the benchmark index from 2014 onwards, as European equities have been more volatile, he said. 

Nevertheless, the JPM fund has a five-crown rating from FE, as it manages to gain to a larger extent during a rising market compared to losses in a downmarket.

For Fidelity, the valuation- and quality-focus strategy offers more solid performance when the market is on a downtrend. But its underperformance makes it less attractive with only a two-crown rating from FE, he added.


The Fidelity fund, the JPM fund and their benchmark over the past three years

 Source: FE Analytics

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