Fidelity Event Driven Opportunities Fund

The Fidelity Event Driven Opportunities Fund (FARNX) seeks capital appreciation by investing in companies involved in corporate events, such as corporate reorganizations, changes in beneficial ownership, and deletion from a market index.

A differentiated approach to U.S. equity exposure

Think like an activist

Shareholder activism has grown significantly in the last five years, so this fund looks to invest in companies targeted by successful 13D filers, who are advocating and effecting change at a company for the benefit of shareholders.

Unlock value from spinoffs

Companies regularly spin off segments of their businesses so that a new independent entity is created from a parent company. These new entities have focused and incentived management teams who are driven and motivated to succeed, oftentimes unencumbered by the restraints of their parent company.

Exploit index rebalancing

Today there are trillions of dollars in passively managed equity assets. Forced selling by passive funds—regardless of a company’s future outlook—may create favorable entry points and lead to a stock with unfairly low expectations for the future.

Types of events and the potential opportunity

  What is the event? What is the potential opportunity?
Corporate spinoffs Creation of an independent company through the sale or distribution of new shares of an existing business/division of a parent company
  • Mispricing from forced selling by passive funds, may create favorable entry points
  • Focused management teams at the new entity
13D filings Required SEC filing when an investor purchases 5% or more of a company's shares
  • Differentiated view of the impact an active beneficial owner may have on advocating and effecting change over time
Index deletions When a firm is deleted from an equity index, such as the S&P 500
  • Mispricing from forced selling by passive funds, may create favorable entry points
  • May create under-appreciated stocks with low investor expectations

The fund may also invest in other special situations not shown.

A history of outperformance with lower correlation

Potential to outperform

Event driven stocks have historically delivered excess returns, relative to U.S. stocks over time, by taking advantage of mispricing in a company’s stock as it undergoes a corporate event.

Lower correlation

Lower correlation of event driven securities may increase attractiveness to investors seeking portfolio diversification, as companies undergoing corporate actions may be less influenced by macro-economic conditions.