Fidelity® International Equity Strategy

A separately managed account that diversifies across developed-market countries outside the U.S. in an effort to deliver returns greater than the MSCI EAFE Index (Net MA Tax) over a full market cycle

Investment strategy: Seeks to deliver long term growth of capital and to outperform the MSCI EAFE Index (Net MA Tax) over a full market cycle.


Types of investments: Primarily U.S. traded American Depositary Receipts (ADRs) and a completion fund3

Investment minimum: $200,000


Gross annual advisory fee: 0.30% – 0.90%1 (varies based on total assets invested)

Why we focus on geographic diversification


In general, we believe a well-diversified equity portfolio should include at least 30% allocation to international securities including developed and emerging markets. Returns from developed-market countries, including the U.S., can vary widely from year‐to‐year, as seen in the chart below. Given these ups and downs, investing around the world may help a portfolio by lessening the impact any one market can have. To this end, the Fidelity® International Equity Strategy diversifies across many developed-market countries outside the U.S. while pursuing capital appreciation over the long‐term.


INDIVIDUAL COUNTRY CALENDAR YEAR RETURNS (%)


Table provides an example of how various types of stocks from various developed-market countries have performed between 2009 and 2018. The countries are, from top to bottom, the United States, Hong Kong, Switzerland, Australia, France, Japan, The Netherlands, Sweden, the United Kingdom, Spain, and Germany. The point of this data is to show how the market performance from country to country can vary significantly in any given year. This one reason the Fidelity International Equity Strategy seeks diversification across multiple non-US developed markets.


Source: FactSet.

Calendar year returns represented by individual country's MSCI IMI Country Index. The MSCI Investable Market Index (IMI) captures large, mid, and small cap representation of approximately 99% of the investable equity universe for each individual country. Eleven countries shown include the United States and the top 10 country holdings in the MSCI® EAFE  Index as of 3/31/19 (represents over 90% of the index's total net assets). See Important Information at the end for the MSCI EAFE Index definition. Past performance is no guarantee of future results. Diversification does not ensure a profit or guarantee against a loss. It is not possible to invest directly in an index. All market indices are unmanaged.


Performance shifts between international growth and value styles


Diversifying across investment styles may help reduce volatility over the long term because outperformance between growth and value can shift dramatically in a short period of time, as seen in the chart below, and the timing of that shift is difficult to predict. For this reason, Fidelity International Equity Strategy allocates across investment styles and adjust as needed to help manage volatility throughout the market cycle.


Table provides an example of how international growth and value stocks have outperformed between 2009 and 2019 using no specific return numbers. Growth stocks are measured by the MSCI EAFE Growth Index and value stocks are measured by the MSCI EAFE Growth Index. As the table shows, different types of stocks have outperformed one another in different years. This illustrates why the Fidelity International Equity Strategy seeks to diversify across both styles.


Source: Morningstar, based on rolling 12-month annualized returns over 121 time periods from 3/31/08 through 3/31/19 of Growth and Value investment styles represented by MSCI EAFE Growth Index and MSCI EAFE Value Index, respectively. Past performance is no guarantee of future results. It is not possible to invest directly in an index. All market indices are unmanaged. Diversification does not ensure a profit or guarantee against loss.

Tapping Fidelity's International Expertise

Since the underlying stock selection within Fidelity® International Equity Strategy models will be a significant source of return potential, Strategic Advisers is leveraging Fidelity’s experience and history of over 65 years managing international equity strategies.


Fidelity has offices and investment professionals all over the globe providing deep, local research and market insight for security selection decisions. Fidelity's on-the-ground presence helps model portfolio providers make educated decisions based on past experience, rigorous fundamental company analysis, and prevailing market trends as they seek long-term capital appreciation for the strategy.



Graphic shows the global distribution of Fidelity's Dedicated International Resources. Boston has 74 Portfolio Managers, 100 Analysts, 18 Associates and 36 Traders. London has 4 Portfolio Managers, 21 Analysts, 3 Associates, and 12 Traders. Bangalore has a Corporate Governance Team. Hong Kong has 2 Portfolio Managers, 20 Analysts, and 7 Traders. Tokyo has 2 Portfolio Managers and 7 Analysts.

Source: Fidelity Investments, as of 12/31/18.

Figures exclude Executive Management, MegaCap Analysts, Technical Analysts, Quantitative Analysts, and Sector Specialists. Analysts and associates primarily classified on their coverage of companies. (Some analysts may also have money management responsibilities and some PMs may post some research.)

*Includes two quantitative analysts with International PM responsibilities and one PM that manages both International and Sector funds.

Our disciplined investment process for this strategy is built upon a foundation of rigorous research. In constructing the portfolio, as shown by the various colored circles on the diagram below, we will blend multiple international equity models, modestly tilting the strategy to certain styles and model portfolio providers approaches throughout the market cycle to help manage risk as well as add value over time. As investment decisions are made and implemented into each client account, we will consider the impact of taxes over time for those accounts where taxes matter.



Graphic depicts the elements that go into the portfolio construction of your SMA. We start with a combination of Fundamental Research, Qualitative Research, and Asset Class Research. From there we apply Risk Management, which is a combination of Model selection and Oversight, Style and Discipline Diversification, Country and Sector Diversification, and Strategic and Tactical Tilts. This allows us to implement decisions into client accounts, considering the impact of taxes over time where applicable.