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Fidelity® Launches Global and International Bond Funds
New Funds Offer Diversified Global Investment-Grade Bond ExposureBOSTON -- Fidelity Investments®, one of the world’s leading global fixed income investment managers with more than $842 billion in managed assetsi, today announced the launch of Fidelity Global Bond Fund and Fidelity International Bond Fund -- available directly to investors -- and Fidelity Advisor Global Bond Fund and Fidelity Advisor International Bond Fund -- available through financial advisors.
Fidelity also published a new paper focused on global bond investing: “Transformations in Country Dynamics and the Implications for Global Bond Markets,” which analyzes the significant structural changes in the global bond landscape.
The Global Bond Funds may be appropriate for investors looking for a core holding that invests across multiple countries and currencies, while providing diversified taxable bond exposure. The International Bond Funds provide many of the same potential benefits as the Global Bond Funds, but they also cater to investors looking for targeted exposure primarily to non-U.S. debt.
“Global economies have undergone significant change over recent years and the opportunities that exist in fixed income markets outside of the U.S. are unprecedented,” said Charlie Morrison, president of Fidelity’s Fixed Income division. “Leveraging our significant global fixed income investment management capabilities, we believe these new funds will appeal to investors seeking diversified global and international investment-grade debt and currency exposure.”
Jamie Stuttard, Fidelity’s head of International Bond Portfolio Management, will serve as the lead portfolio manager for the Global Bond Funds and the International Bond Funds. Curt Hollingsworth and Jeff Moore will co-manage the Global Bond Funds, while Hollingsworth will also co-manage the International Bond Funds. In addition, Matt Conti will manage the high yield assets of each fund.
The funds, which invest in sovereign government debt and corporate and securitized credit securities, will be measured against a GDP (Gross Domestic Product)-weighted index. This benchmark differs from the market capitalization-weighted approach that many other global and international bond funds employ.
“The global bond landscape is in the midst of significant structural changes that should challenge prevailing assumptions and industry norms behind investing and risk management,” said Stuttard.
“With this in mind, investors should pick their bond indices carefully and develop appropriate frameworks for investing in government debt, corporate bonds and currencies.”
Transformations in Country Dynamics and the Implications for Global Bond Markets
The Fidelity report, “Transformations in Country Dynamics and the Implications for Global Bond Markets,” highlights the merits of a GDP-weighted benchmark. A GDP-weighted mandate invests in the world’s most established economies -- those with the largest GDP. This approach is in stark contrast to a market-capitalization approach, where the benchmark is based on the amount of debt each issuer has outstanding. That approach explicitly favors larger, more indebted issuers, regardless of their ability to service that debt.
In fact, as the following table demonstrates, some of the most indebted countries in the world, such as Japan and Italy, have extremely high debt-to-GDP ratios.
“In our view, GDP is a better starting point than indebtedness when considering what weighting to apply to a specific country in a bond index. Economic size provides at least a first step in evaluating the available tax base -- and thus revenues -- to service government debt obligations,” said Stuttard.
Global Bond Fund
The Global Bond Funds invest in securities issued throughout the world, including emerging markets. The funds will normally invest primarily in investment-grade debt securities. The Global Bond Funds invest their assets in both U.S. dollar-denominated and non-U.S. dollar-denominated securities, and will actively manage currency exposures. The funds may invest up to 20% of its assets in lower quality debt securities. The Global Bond Funds will be managed against the Barclays Global Aggregate GDP Weighted Index. Aggregate indices include corporate bonds, bank capital and securitized bonds in addition to government bonds.
International Bond Fund
The International Bond Funds invest primarily in non-U.S. dollar-denominated securities, including emerging markets. The funds will normally invest primarily in investment-grade debt securities and will actively manage currency exposures. The International Bond Funds may invest up to 20% of their assets in lower quality debt securities. The funds will be managed against the Barclays Global Aggregate ex-USD GDP Weighted Index.
Fidelity Continues Significant Global Fixed Income Expansion
Over the past year, Fidelity has made significant progress in expanding and deepening its global fixed income investment management capabilities. During this period, the firm hired its first London-based fixed income portfolio manager, Jamie Stuttard, added 10 research analysts and traders, and launched a state-of-the-art trading operation. Fidelity now has 25 investment professionals in its London office.
Fidelity has continued to expand its fixed income product offering. Last year, the company launched several new fixed income funds including Fidelity Global High Income Fund, Fidelity Conservative Income Bond Fund, Fidelity Defined Maturity Funds, and Fidelity Total Emerging Markets Fund -- available directly to investors and through financial advisors.
Investors can learn more about the new funds by visiting Fidelity.com. Financial advisors can get more information about the funds by visiting Fidelity Financial Advisor Solutions’ client web site (advisor.fidelity.com).
About Fidelity Investments
Fidelity Investments is one of the world’s largest providers of financial services, with assets under administration of $3.6 trillion, including managed assets of $1.6 trillion, as of April 30, 2012. Founded in 1946, the firm is a leading provider of investment management, retirement planning, portfolio guidance, brokerage, benefits outsourcing and many other financial products and services to more than 20 million individuals and institutions, as well as through 5,000 financial intermediary firms. For more information about Fidelity Investments, visit www.fidelity.com.
1) as of March 31, 2012.