Every month in my
Top Funds Report
newsletter, I write a summary of my views about specific funds and fund
companies based on queries from readers. These are often funds that have
undergone management changes or are new issues, a little less well known,
or not as widely covered as some of the high fliers. Here’s a look at a
Fidelity fund with a unique strategy.
Fidelity Event Driven Opportunities Fund
This is one of those funds that is hard to categorize. It’s classified as a
U.S. Small/Mid-Cap fund, but that may not always be the best place for it.
It has a unique mandate that looks to take advantage of corporate events
that can help unlock shareholder value, including spinoffs, mergers, index
additions or deletions, and 13-D filings.
A 13-D filing provides notification that a person or group has taken an
interest of more than 5% in any class of a company’s shares. These types of
events can provide outsized profits if you’re able to identify them early.
This is because in some cases, there may be forced buying or selling, which
can create share price movements.
In some cases, the companies may be under-followed by the analyst
community, which can create an inefficiency that allows the manager to
benefit as the broader market begins to recognize the potential impact of
the event. These types of opportunities don’t adhere to any set schedule –
they can play out very rapidly or take a long time to develop. And this
means that the fund’s managers must be very nimble indeed.
Performance of the fund has been solid, with a 3-year average annual
compounded rate of return of 6.6%, ending Nov. 30. However, the fund can be
more volatile than the broader market, as recently confirmed by its 3-year
average standard deviation of 13.1% (as of Nov. 30), which is higher than
both the index and peer group. Still, the fund has done a solid job
protecting capital in falling markets, participating in roughly three
quarters of the market declines.
While not for everyone, the fund can be an interesting addition to a
portfolio for those with an above-average risk tolerance, an appetite for
growth, and a long-term time horizon. I would definitely not consider this
a core holding, but rather a piece of an otherwise well-diversified
Dave Paterson, CFA, is the Director of Research, Investment Funds for
D.A. Paterson & Associates Inc., a consulting firm specializing in providing research and due
diligence on a variety of investment products. He is also the publisher
Dave Paterson’s Top Funds Report,
offering regular commentary and in-depth analysis of Canada’s top
investment funds. He uses a unique analytical approach to identify
funds with strong, risk-adjusted returns, and regularly publishes his
insights and analyses in Fund Library.
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only and is not intended as personalized investment advice.