James Abela

Independent research house, Morningstar, has upgraded Fidelity International’s Fidelity Future Leaders Fund rating to ‘Gold’, effective 29^th August 2025. 

The Fidelity Future Leaders Fund invests in 40 to 70 high-quality small- to mid-cap Australian companies, providing investors with the potential for long-term capital growth in a diversified portfolio. The fund was launched in 2013 and has been run since inception by portfolio manager, James Abela, who is supported by an experienced team of investment analysts and Fidelity’s extensive global research network.

In its report, Morningstar said the fund stands out for its esteemed portfolio manager and excellent process. “The combination of Fidelity Future Leaders’ skilled portfolio manager and strengthened confidence in the process sees the strategy regain its place at the top of its category. Over the trailing three years to July 2025, shrewd and well-timed adjustments to the portfolio’s composition across the four styles, primarily a gradual increase in exposure to quality stocks, delivered outstanding performance relative to the average peer and more than doubled the return of the Morningstar Category index,” said Morningstar.

Portfolio manager James Abela says the performance of the fund is underpinned by the rigorous and thorough investment process which focuses on the four investment styles: quality, transition, momentum and value.

“Our goal is to identify tomorrow’s leading Australian large-cap companies by investing in today’s small to mid-cap firms. Our investment approach focuses selecting well-valued businesses that demonstrate strong competitive advantages and solid management teams. We place significant importance on constructing a diversified and balanced portfolio with the goal of delivering stable returns across various market cycles. The re-rating of the Fidelity Future Leaders Fund by Morningstar to Gold is a testament to our investment process. With this fund, we offer our clients an opportunity for attractive long-term double-digit returns, all while remaining focused on local investments,” said Mr Abela.

The Fidelity Future Leaders Fund has returned 20.24 per cent annualised over the past year, and has outperformed the index since inception, returning 11.99 per cent per annum. The fund is available on several platforms including HUB24, Netwealth, Praemium, BT Panorama, Macquarie Wrap among others.

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Lawrence Hanson

Fidelity International will be launching four active exchange traded funds (ETFs) for Australian investors. Its Fidelity Australian High Conviction Fund, Fidelity Asia Fund, Fidelity India Fund and Fidelity Global Future Leaders Fund will be made available as actively managed ETFs via the Australian Securities Exchange (ASX) under ticker codes: ‘FHCO, ‘FASI, ‘FIIN and ‘FCAP. The Fidelity Asia Fund, Fidelity India Fund and Fidelity Global Future Leaders Fund will launch on 31 May 2024 and the Fidelity Australian High Conviction Fund, previously known as the Fidelity Australian Opportunities Fund (renamed on 20 May 2024), will launch on 3 June 2024.

Fidelity’s managing director, Lawrence Hanson commented: “Making these four strategies available as ETFs allows investors easy access to some of our most popular funds in Australia, with solid long-term track records.  Whether they are seeking exposure to offshore market opportunities like Asia, India or global small to mid-caps, or to a high quality concentrated Australian strategy, investors can now tap into our 400+ investment professionals in one simple trade.

“Investors enjoy the ease of investing and transacting through ETFs. We have seen growing demand for accessible and flexible investment solutions among Australian investors, and the ETF structure enables us to offer our clients an alternative option on how they invest in our products.

“That is why we are launching more of our top strategies through this vehicle,” said Mr Hanson.

The Fidelity Australian High Conviction Fund was established on 31 July 2012 and is managed by Australian-based Casey McLean. The Fund is a concentrated portfolio of 20-40 Australian high-quality stocks, with risk management at its core.  The Fund leverages Fidelity’s 20 years’ investment experience in Australia and insights from our global network.

The Fidelity Asia Fund was established on 29 September 2005 and is managed by Singapore-based portfolio manager, Anthony Srom. The Fund is a concentrated portfolio of 20 to 35 of our best investment opportunities across the Asia Pacific (ex-Japan) region, and benefits from insights from our large on-the-ground team and 50 years’ investing in the region.

The Fidelity India Fund was established on 29 September 2005 and is managed by Singapore-based portfolio manager, Amit Goel. The Fund gives investors access to the growth story of India, by investing in a diversified portfolio of 40 to 60 stocks. Using research from our large-on-the-ground team of analysts, we’ve been focused on finding quality businesses with strong management for more than 18 years.

The Fidelity Global Future Leaders Fund was established on 28 September 2020 and is managed by Australian-based portfolio managers, James Abela and Maroun Younes. The Fund invests in quality high-potential companies in global small and mid-caps.  The fund is co-managed, using a unique investment process designed to deliver smoother returns through market cycles, and benefits from the insights from our 400+ investment professionals around the world.

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James Abela

Well, what a difference six months can make. Throughout 2021 there were concerns building around valuations, the large swell of unintended consequences or distortions of near-free money that led to record loss-making companies in the Australian market. Not to mention record valuations for growth stocks, low pricing of risk, high levels of corporate activity and a sense that this couldn’t last.

Now there is growing concern about stagflation or recessions, particularly in Europe, and lockdowns in China will continue to cause supply chain issues for some time to come. At home, Australia is faced with a cooling housing market after some very strong asset price growth years and the equity market has become acutely focused on valuations, with much lower tolerance for risk.

An investor’s focus should be shifting towards free cash flows, profitability sustainability, earnings duration and visibility, the market structures companies operate in, the ability to maintain operating margins in the face of higher costs (higher labour wages, commodity prices, energy prices, rising capital and debt costs) and supply chain issues.

While the Australian consumer has been resilient and confident, this is expected to soften as we move through 2022, especially as the positive tailwind of a strong Australian housing market is now slowing. These emerging trends were confirmed at recent Australian company presentation conferences and the pressures are building across a spectrum of industries.

Equity markets have been trending down in the last few months after pricing in a sharp economic recovery over the last two years. Valuations rightfully have taken centre stage after asset prices in Australian housing, equities, bonds and cash all reached territories that were deemed unsustainable. In times like these, it is important to stay focused on the long term. Cash flows will continue to drive earnings, and earnings will drive share prices.

Recently, the very low cost of capital created some significant valuation distortions, especially in quality and momentum natured companies, and these are now adjusting. Momentum will likely face far greater scrutiny as this has already in groups such as e-commerce, COVID-19 winners, loss makers, home meal delivery, ‘buy now, pay later’, housing, online gaming, early stage software and concept stocks.

Quality will receive a significant valuation check as investor duration moves in closer, interest rates rise and discount rates are lifted. For those quality companies that generate strong cash generation, and are in strong market positions to manage through inflation and costs, this current market dislocation is likely to present a buying opportunity. However, exuberant valuations of over 100x price-to-earnings ratios are unlikely to return in the short term. Growth at a reasonable price will be the mainstay of a portfolio focused on quality rather than growth at any price.

Also, remember that there are still structural themes that will continue to drive change, innovation and leadership in markets and products:

• cleaner and green technology
• changing consumer habits
• wealth management
• virtual cloud, network infrastructure, e-commerce, platform entertainment and automation
• increasing medical needs and medical innovation
• resources scarcity.

Value as a style and defensives are exhibiting strong price performances in current market conditions. Valuations here should also be kept in mind as these asset classes will also have their own limitations due to rising inflation, labour rates, higher debt costs as equity markets may take these stocks to peak sentiment, peak valuation and high expected returns as a safe haven from volatility as well as uncertainty. Low quality earnings, weak market structures, competitive market places, high financial leverage and poor sustainability would be the areas where investors would be wise to be more cautious.

The Australian Future Leaders Fund is remaining balanced with a blend of quality at reasonable price companies (healthcare and technology), defensives (real estate, airports, petrol stations), industrials (chemicals, engineering services) as well as resources (lithium, nickel, copper, gold).

By James Abela, portfolio manager

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James Abela

Outlook and market observations

Over the last six months, the market has shifted from focusing on value styles, valuations and short-term earnings to long-term realities of business models as well as market structures. The focus we saw during reporting season will likely continue into 2023: operating margins, earnings growth, persistency of returns, cash generation, debt levels, market structures within industries, competition intensity levels, consumer confidence experience by companies, top-line sales outlook, and the visible level of certainty in management presentations.

Global news and concerns about the financial system began this month with the failures of US banks Silicon Valley Bank and Signature Bank. In Europe, Credit Suisse collapsed and was purchased by UBS. The American and European financial system regulators have prevented a major collapse of confidence in the global financial system, which has stopped the series of events that would take investors back to the 2009 global financial crisis. In Australia, we believe the banking system remains well capitalised as a result of the conservative business activities and strong regulation, which has positioned the country with relative strength.

Mergers and acquisitions (M&A) emerged for a number of companies, which signalled that companies may be struggling for growth, but also have strong balance sheets to utilise. Companies’ motivations to undergo M&A are broad and include seeking growth options in: a rising inflationary environment and a lower expected growth world, attempting to put strong balance sheets to work to optimise returns on capital, seeking to move up or down the value chain to secure supply in an increasingly competitive world, or increasing scale and leverage to lower costs.  We will likely see this trend continue throughout 2023.

Australian consumer sentiment remains somewhat of a double-edged sword, with the outlook looking optimistic with concern about the second half of the year. Post-Covid, we have seen an increase in consumer spending (hotels, cafes, restaurants, shopping centres, holiday destinations, rental accommodation, business trips and preparing for family gatherings). However, this flies in the face of the data reflecting consumer confidence, which is at low levels due to the flow-through impact of housing costs (mortgages, rent cost increases) and cost of living, which is impacting the consumer psyche as spending concerns are emerging, but not yet visible in retail sales trends. With employment remaining strong, Australia is not experiencing any material economic weakness; however, the drift toward softer business investment or employment is likely to create downward pressure in the current positive economic circumstances.

Valuation of the equity market (price to earnings ratios) continues to be in a lower range compared to history due to increasing pressures on the business environment. The dispersion range between high-growth and low-growth companies has begun to expand as the scarcity of earnings growth, certainty, sustainable margins and confidence in management has narrowed.

If we look at the ‘Toddler index’ (which signifies the proportion of each index where companies have been listed less than 3 years) market liquidity is getting tighter and company aging profile is increasing.

Compare this to 2017, when liquidity levels were high, so company “ageing” was declining which was also the case in 2016, 2007 and 2000.

The Fund maintains a strategic tilt toward quality (software, healthcare, global consumer services, defensives, insurance brokers) and transition or value (real estate, airports, travel, global industrials, gold) with the intention of providing a higher-than-average growth outlook with a low valuation premium to navigate the beginning of 2023.

By James Abela, portfolio manager, Fidelity International

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James Abela

Fidelity International has launched the Fidelity Global Future Leaders Fund, providing Australian investors targeted exposure to small and mid-cap investment opportunities from around the world.

The fund, co-managed by portfolio managers James Abela and Maroun Younes, offers access to an actively managed portfolio of 40 to 70 small to mid-cap global stocks with a market capitalisation between US$1 billion and US$40 billion.

The investment process is designed to identify the global large cap companies of the future at an early stage of their growth, based on the existing and highly successful strategy of the Fidelity Future Leaders Fund, managed by James Abela.

Co-managers James Abela and Maroun Younes commented: “There’s a lot more to global investing than the mega household names like Apple and Amazon. The small- and mid-cap portion of the market offers investors exposure to inefficiently priced or undiscovered companies in their earlier stages of growth or maturity, and the associated upside growth prospects.

“In effect, we are looking for the stars of tomorrow, today – attractively valued companies with strong competitive positioning and sound company management.”

When considering stocks for the portfolio, the managers start by identifying stocks where the fundamentals are viable, sustainable and credible.

Once they have narrowed down the universe of 1,000 stocks using these criteria, valuation metrics become the focus.  The stocks are assigned to one of four segments: quality, value, transition and momentum.

They continue: “Our aim is to own a balance of stocks across these four segments which we believe can deliver more consistent returns through different market cycles.”

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Alex Duffy

Fidelity International has been rewarded for its investment approach after being announced as the winner across two categories at the 2019 Zenith Fund Awards, including Australian Equities – Small Caps and International Equities – Emerging Markets and Regional.

The awards, hosted by Zenith Investment Partners, were announced at a lunch in Sydney yesterday, and recognise and encourage excellence in funds management. Each of the awards is based on long-term factors derived from Zenith’s extensive research and due diligence of fund managers including: 

• organisational and investment team strength,
• investment philosophy, 
• security valuation and selection,
• portfolio construction,
• risk management, and
• fees.

Zenith also looks at quantitative aspects of the funds longer term returns to investors in determining the award winners. It believes that recognising and encouraging excellence in funds management across all asset classes and disciplines is fundamental to raising the standards of funds management in the industry for the ultimate benefit of investors.

Fidelity’s Australian small and mid-cap fund, Fidelity Future Leaders Fund, is managed by James Abela and was launched in July 2013. Over the last year, it has returned 11.16 per cent after fees, compared to the benchmark return of 3.69 per cent*.  

The fund gives investors access to a diversified portfolio of between 40 to 70 stocks from listed Australian small to mid-cap companies. Mr Abela, who has 22 years’ investment experience, employs a rigorous bottom-up stock selection process that focuses on finding attractively valued companies with strong competitive positioning and sound company management.

Fidelity International director of consultant relationships, Andrew Mellor, said the fund is supported by a highly experienced Australian research team with a global network of 400 investment professionals.

“This award is recognition of the success of our efforts within the Australian equities space and testament to James’ sound investment approach which aims to deliver consistent returns through different market cycles,” he said.

The asset manager was also recognised for its performance within emerging markets investing. Fidelity International’s range of emerging market funds cover Asia, Emerging Markets, China and India, with the Fidelity Global Emerging Markets Fund offering investors access to a prudent investment approach that aims to provide attractive returns over time, while minimising loss of capital.

Mr Mellor said the fund has a particularly strong track record backed by more than 20 years’ experience investing in emerging markets, informed by over 50 on-the-ground analysts.

“Portfolio manager Alex Duffy applies a rigorous bottom-up stock selection process that focuses on companies that we believe are well positioned to generate returns through market cycles and have demonstrated a track record of strong corporate governance. Again, this award is validation that our investment approach [within emerging markets] is robust and hopefully our performance and returns will continue to exceed expectations,” he said.

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Michael Bargholz

Fidelity Worldwide Investment (‘Fidelity’) has announced the launch of a new Australian Equities fund – the Fidelity Future Leaders Fund. The Fund will invest in stocks outside the ASX top 50, offering investors exposure to the mid- and small-cap market through a portfolio of 40-70 stocks.

The fund will be managed by investment analyst and portfolio manager, James Abela, who has managed a successful pilot fund of the same strategy for the past four years.

Mr Abela has 15 years’ investment experience, the past 9 of which have been within Fidelity’s highly successful Australian equities team, where he has covered sectors including banking, insurance, diversified financials, consumer, healthcare, mining services and telecommunications.

The new Fund adopts a research based process which looks to identify stocks which have the viability of rising return on equity, sustainability of returns that can fund growth and the credibility of a quality management team.  Disciplined portfolio construction leads to a diversified portfolio which aims to be resilient to market pressures across the cycle.

Managing Director of Fidelity Worldwide Investment in Australia, Michael Bargholz, says the new Fund offers investors a new way to access Fidelity’s proven talent in this asset class.

‘We have been managing the Fidelity Australian Equities Fund with above benchmark performance for the past decade. James has been an integral member of the Australian Equities team during this time and we are confident this strategy will prove equally successful.’

Mr Abela will be supported by the research of 9 equity analysts covering stocks within his universe, as well as the broad investment resources of Fidelity’s global analyst team.

The Fund is available for a minimum initial investment of $25,000 and Fidelity will be looking to place the Fund on leading platforms in the near term.

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