Strategic Advisers Growth Fund - Fidelity Investments
←
→
Page content transcription
If your browser does not render page correctly, please read the page content below
PORTFOLIO MANAGER Q&A | AS OF MAY 31, 2020
Strategic Advisers® Growth
Fund
Key Takeaways MARKET RECAP
• For the fiscal year ending May 31, 2020, the Fund gained 26.60%, The S&P 500® index gained 12.84% for
outpacing the 26.25% advance of the benchmark Russell 1000® the year ending May 31, 2020, in what
Growth Index. was a bumpy ride for U.S. equity
investors, marked by a steep but brief
decline due to the early-2020 outbreak
• After trending higher from August to mid-February, the Russell 1000® and spread of the coronavirus, followed
Growth Index fell considerably in March amid coronarvirus fears, then by a sharp upturn. Declared a pandemic
rebounded dramatically from late March through the end of the on March 11, the COVID-19 crisis and
period. containment efforts caused broad
contraction in economic activity, along
• In this environment, the Fund's underlying managers that pursued with extreme uncertainty, volatility and
fundamentally driven strategies, with an emphasis on bottom-up dislocation in financial markets. By mid-
security selection, particularly those with an aggressive-growth style, March, U.S. stocks had entered bear-
did the best. Conversely, quantitative strategies struggled as shifts in market territory less than a month after
market leadership during the period made identifying investable hitting an all-time high and extending the
trends difficult. longest-running bull market in American
history. Stocks slid in late February, after
• Fidelity® Growth Company Fund was the biggest contributor versus a surge in COVID-19 cases emerged
outside China. The downtrend continued
the benchmark by far. Strong stock picks powered the fund past the
in March (-12.35%), capping the index's
Russell 1000 Growth Index by an outsized margin.
worst quarter since 2008. A historically
rapid and expansive U.S. monetary/fiscal-
• On the downside, sub-adviser ClariVest Asset Management was the policy response helped provide a partial
most notable relative detractor. The mid-period shift from low volatility offset to the economic disruption. This
to value weighed on this manager's quantitative, momentum-driven was evident in April, when the index
strategy. achieved its highest monthly gain
(+12.82%) since 1991, boosted by
• As of May 31, the Fund is tilted toward underlying strategies that focus improving infection data, plans for
on companies exhibiting high rates of sales and earnings growth. reopening the economy and progress on
potential treatments. The turnaround
• On June 3, 2020, the Board of Trustees approved a proposal to merge continued in May, even as high
Strategic Advisers® Core Fund, Strategic Advisers® Growth Fund and unemployment persisted. By sector,
Strategic Advisers® Value Fund into a new fund, Strategic Advisers® energy (-29%) fell hard along with the
price of crude oil. Financials (-8%) and
Large Cap Fund, subject to shareholder approval. A special meeting of
industrials (-4%) also notably lagged. In
the shareholders is expected to be held in the fourth quarter of 2020.
contrast, information technology (+38%)
This reorganization would occur on a tax-free basis, and if approved
led by a wide margin, followed by health
by shareholders of each Fund, is expected to take place on or about care (+21%), communication services and
November 13, 2020. consumer discretionary (each +16%).
Shares are offered only to certain clients of Strategic Advisers LLC
– not available for sale to the general public
Not FDIC Insured • May Lose Value • No Bank Guarantee
PORTFOLIO MANAGER Q&A | AS OF MAY 31, 2020
Q&A
An interview with Lead Portfolio
Manager John Stone and Co-Portfolio
Manager Niall Devitt
John Stone Niall Devitt
Lead Manager Co-Manager
Q: John, how did the Fund perform for the fiscal
year ending May 31, 2020
Fund Facts
J.S. The Fund gained 26.60% the past 12 months, modestly
Trading Symbol: FSGFX outpacing the 26.25% advance of the benchmark Russell
1000® Growth Index and topping the peer group average by
Start Date: June 02, 2010
a wider margin.
Size (in millions): $8,906.36
Q: How would you describe the investment
environment this period
J.S. It was a generally favorable backdrop until the
Investment Approach coronavirus-fueled sell-off pressured growth stocks and other
risk assets in March. Given the strong advance from early
• Strategic Advisers® Growth Fund (the Fund) is a multi-
August to mid-February, we thought some degree of market
manager investment strategy that seeks capital
correction was likely. However, the downturn was much
appreciation by investing primarily in U.S. large-cap
stocks believed to have above-average growth potential. worse than anticipated due to the extreme uncertainty
sparked by the COVID-19 pandemic. Then, from late March
• The Fund provides diversified exposure to multiple to the end of May, we witnessed a powerful recovery that
growth-oriented investment vehicles – including sub-
propelled the Russell 1000 Growth Index to a strong double-
advised strategies, mutual funds and, at times,
digit gain for the period.
exchange-traded funds (ETFs) – selected from what we
believe are the best ideas of Strategic Advisers' research Within this environment, growth-oriented stocks
department. We evaluate the tradeoff between cost, outperformed their value counterparts by an outsized
liquidity and investment flexibility to determine what we margin. For example, the Fund's Russell 1000 Growth
believe is the optimal investment mix. benchmark rose 26.25% for the period, while the Russell
• Our investment process emphasizes prudent manager 1000 Value Index returned -1.64%.
selection based on the view that different investment
approaches may outperform at different times over a full Q: Tell us more about your strategy and how it
market cycle, and that combining these investment
disciplines may result in a more consistent performance
influenced performance.
profile. J.S. The Fund employs a multi-manager investment
• We believe the ability to utilize the distinctive skills of a approach, allocating assets among a group of style-specific
variety of managers helps provide investment sub-advisers and mutual funds. We seek to outperform the
diversification and also may provide the portfolio Fund's benchmark over a full market cycle by employing
manager(s) more flexibility to invest more adeptly what we determine to be an appropriate mix of underlying
throughout the market cycle, and potentially allow for investment strategies based on factors such as market
better risk management. environment and management style.
This period, those managers that pursued fundamentally
driven strategies, with an emphasis on bottom-up security
selection, did the best. Conversely, quantitative strategies
struggled as shifts in market leadership made identifying
investable trends difficult. From a factor perspective,
aggressive growth outperformed all other styles the past 12
months.
2 | For definitions, fund risks and other important information, please see the Definitions and Important Information section of this Q&A.PORTFOLIO MANAGER Q&A | AS OF MAY 31, 2020
Q: Niall, which managers contributed versus the make wiser operational and capital-allocation decisions. The
fund's managers evaluate each company's competitive
benchmark
position and forecast their financials to identify what they
N.D. We had one very sizable relative contributor this period, believe are undervalued but well-led businesses. Overall, I
which was also our largest investment: Fidelity® Growth would characterize their approach as opportunistic growth,
Company Fund (+39%). This fund's aggressive-growth style focused on large-cap companies.
and focus on mega-cap information technology stocks
ClearBridge, Principal and sub-adviser Loomis Sayles have
helped it outpace the benchmark by about 13 percentage
similar approaches to portfolio construction. None of the
points. In addition to technology, investment choices in the
three have a particular style bias relative to the benchmark.
health care and consumer discretionary sectors added
They construct portfolios that are similar, but seek to
considerable value.
differentiate themselves from the Russell 1000 Growth Index
A new addition to the portfolio, the Large Cap Growth through security selection rather than style tilts. Because of
strategy from sub-adviser ClearBridge, was a more modest this, we think holding the three managers as a group gives
contributor. We hired this manager in April to run its the Fund a better chance to outperform than if we held only
benchmark-aware, opportunistic growth strategy within the one of them.
Fund. This strategy utlizes fundamental research to create a
In April, we shifted assets away from sub-adviser MFS
portfolio that resembles the Russell 1000 Growth Index but
Investment Management and reallocated the proceeds to
seeks to generate outperformance through stock selection.
these new portfolio additions.
ClearBridge organizes its holdings into cyclical, steady and
high-growth categories.
Q: What is your outlook as of May 31, John
Q: What about detractors J.S. As we progress through the summer and into the fall,
U.S. policymakers and business leaders will continue to
N.D. Sub-adviser ClariVest Asset Management (+22%) was
assess the impact of the coronavirus as the economy remains
the biggest detractor versus the benchmark. We employ this
open. Although we anticipate continued market volatility, we
manager's quantitative strategy in order to provide the Fund
believe investor fear will diminish. We, in turn, believe that
with exposure to market momentum. Its approach worked
risk-taking will be rewarded, particularly in sectors that are
well during the early months of the period, tracking the
highly sensitive to economic growth, including industrials,
positive momentum of low-volatility stocks. ClariVest faced a
financials, energy and consumer discretionary. Furthermore,
big reversal in September, however, when investors rotated
in such an environment, we think small-cap stocks – which
to value-driven stocks. Under the hood, security selection
are heavily influenced by the performance of the domestic
within financials, communication services and industrials
economy – also may perform well. I describe how we have
hampered performance.
positioned the Fund in light of this outlook in the callout
Janus Henderson Enterprise Fund (+6%), which pursues a portion of this review. ■
mid-cap strategy with a growth tilt, also hampered the
broader Fund's relative result the past 12 months. The
managers of this fund look for firms that they believe can
continue to grow throughout the business cycle,
emphasizing duration of growth over short-term growth
rates. The emphasis on durable growth has helped the
strategy hold up during down markets without giving up too
much ground in rallies. This period, however, the fund
stumbled with overweighted allocations in lagging sectors
such as industrials and financials, as well as picks in
technology. Within tech specifically, the managers avoided
stocks in areas that they thought were overvalued, such as
cloud computing and software-as-a-service.
Q: Did you make any notable changes to the
Fund's positioning this period
N.D. Yes. In addition to hiring ClearBridge, we also added
Principal Blue Chip Fund. The central tenet for Principal's
strategy is that owner-operators – or management teams
with that mindset – tend to have long-term perspectives and
3 | For definitions, fund risks and other important information, please see the Definitions and Important Information section of this Q&A.PORTFOLIO MANAGER Q&A | AS OF MAY 31, 2020
ASSET ALLOCATION
Portfolio
John Stone on portfolio positioning: Asset Class
Portfolio
Weight
Weight Six
Months Ago
Equity Investments 99.52% 99.48%
"As of period end, the Fund had a modest
aggregate overweighting in economically sensitive Equities 52.69% 47.01%
(i.e., cyclical) areas of the market. Consequently, it Mutual Funds 46.83% 52.47%
was positioned to potentially benefit from the ETFs 0.00% 0.00%
continued reopening of the U.S. economy.
Bonds 0.00% 0.00%
"Given the consistently strong performance of Cash & Net Other Assets 0.48% 0.52%
secular growth stocks during the past few years, the Net Other Assets can include fund receivables, fund payables, and offsets
performance dispersion between those stocks and to other derivative positions, as well as certain assets that do not fall into
cyclical companies is extremely wide. Secular any of the portfolio composition categories. Depending on the extent to
growth stocks include, for example, the so-called which the fund invests in derivatives and the number of positions that are
held for future settlement, Net Other Assets can be a negative number.
FAANG stocks: Facebook, Amazon.com, Apple,
Netflix and Google/Alphabet.
"If the economy recovers during the second half of
MANAGER ALLOCATION
2020 and through 2021, we believe lower-quality
companies trading at relatively cheap valuations will
Manager Portfolio Weight
outperform secular growth stocks.
Sub-Adviser Total 53.16%
"This is not to say that we think secular growth firms
Clarivest Asset Management LLC U.S. Equity 23.63%
are going to underperform. On the contrary, these
stocks have become somewhat of a 'defensive' Loomis Sayles & Co L.P. U.S. Equity 17.34%
fallback for investors when uncertainty increases CLEARBRIDGE INVESTMENTS LLC U.S. Equity 12.12%
about the companies' ability to keep growing. This FIAM LLC U.S. Equity 0.07%
is why, even during periods of weakness in the Top Mutual Fund Positions 46.82%
broader economy, the FAANG stocks have tended
Fidelity Growth Company Fund 33.29%
to outperform.
Janus Henderson Enterprise Fund 6.78%
"Looking at the underlying strategies in the Fund,
Fidelity SAI U.S. Quality Index Fund 2.42%
the portfolio is tilted toward secular growth stocks
Principal Blue Chip Fund Institutional Class 1.75%
while still having meaningful exposure to cyclicality.
Fidelity Contrafund 1.63%
"Despite disappointing performance the past 12
Fidelity SAI U.S. Large Cap Index Fund 0.91%
months, as of period end, we plan to maintain the
portfolio's position in Janus Henderson Enterprise Fidelity SAI U.S. Momentum Index Fund 0.04%
Fund. In our view, its mid-cap focus provides a Remaining Investments 0.02%
beneficial counterbalance to the preponderance of Manager allocations are as of the end of the reporting period and may not
large-cap strategies within the broader Fund." be representative of the fund's current or future investments. Excludes
money market investments.
4 | For definitions, fund risks and other important information, please see the Definitions and Important Information section of this Q&A.PORTFOLIO MANAGER Q&A | AS OF MAY 31, 2020
FISCAL PERFORMANCE SUMMARY: Cumulative Annualized
Periods ending May 31, 2020 6 1 3 5 10 Year/
Month YTD Year Year Year LOF1
Strategic Advisers Growth Fund
9.94% 6.85% 26.60% 15.55% 12.94% 14.51%
Gross Expense Ratio: 0.62%2
Russell 1000 Growth Index 8.41% 5.23% 26.25% 17.21% 14.50% 15.95%
Morningstar Fund Large Growth 6.41% 3.72% 20.42% 14.52% 11.70% --
% Rank in Morningstar Category (1% = Best) -- -- 21% 40% 38% --
# of Funds in Morningstar Category -- -- 1,353 1,244 1,084 --
1 Life
of Fund (LOF) if performance is less than 10 years. Fund inception date: 06/02/2010.
2 Thisexpense ratio is from the prospectus in effect as of the date shown above and generally is based on amounts incurred during that fiscal year. It
does not include any fee waivers or reimbursements, which would be reflected in the fund's net expense ratio.
Past performance is no guarantee of future results. Investment return and principal value of an investment will fluctuate; therefore, you may have a
gain or loss when you sell your shares. Current performance may be higher or lower than the performance stated. Performance shown is that of the
fund's Retail Class shares (if multiclass). You may own another share class of the fund with a different expense structure and, thus, have different
returns. To learn more or to obtain the most recent month-end or other share-class performance, visit fidelity.com/performance. Total returns are
historical and include change in share value and reinvestment of dividends and capital gains, if any. Cumulative total returns are reported as of the
period indicated. Please see the last page(s) of this Q&A document for most-recent calendar-quarter performance.
5 | For definitions, fund risks and other important information, please see the Definitions and Important Information section of this Q&A.PORTFOLIO MANAGER Q&A | AS OF MAY 31, 2020
Definitions and Important Information information. Fidelity does not review the Morningstar data and, for
mutual fund performance, you should check the fund's current
prospectus for the most up-to-date information concerning
Information provided in this document is for informational and
applicable loads, fees and expenses.
educational purposes only. To the extent any investment information
in this material is deemed to be a recommendation, it is not meant to % Rank in Morningstar Category is the fund's total-return
be impartial investment advice or advice in a fiduciary capacity and is percentile rank relative to all funds that have the same Morningstar
not intended to be used as a primary basis for you or your client's Category. The highest (or most favorable) percentile rank is 1 and
investment decisions. Fidelity, and its representatives may have a the lowest (or least favorable) percentile rank is 100. The top-
conflict of interest in the products or services mentioned in this performing fund in a category will always receive a rank of 1%. %
material because they have a financial interest in, and receive Rank in Morningstar Category is based on total returns which
compensation, directly or indirectly, in connection with the include reinvested dividends and capital gains, if any, and exclude
management, distribution and/or servicing of these products or sales charges. Multiple share classes of a fund have a common
services including Fidelity funds, certain third-party funds and portfolio but impose different expense structures.
products, and certain investment services.
FUND RISKS
Growth stocks can perform differently from the market as a whole
and can be more volatile than other types of stocks. Stock markets
are volatile and can decline significantly in response to adverse
issuer, political, regulatory, market, or economic developments.
These risks may be magnified in foreign markets. Foreign securities
are subject to interest rate, currency exchange rate, economic, and
political risks. The fund can invest in ETFs which may trade at a
discount to their NAV. Fund of funds bear the risks of the investment
strategies of their underlying funds. The fund may have additional
volatility because it can invest a significant portion of assets in
securities of a small number of individual issuers.
IMPORTANT FUND INFORMATION
Relative positioning data presented in this commentary is based on
the fund's primary benchmark (index) unless a secondary benchmark
is provided to assess performance.
INDICES
It is not possible to invest directly in an index. All indices represented
are unmanaged. All indices include reinvestment of dividends and
interest income unless otherwise noted.
Russell 1000 Growth Index is a market-capitalization-weighted
index designed to measure the performance of the large-cap growth
segment of the U.S. equity market. It includes those Russell 1000
Index companies with higher price-to-book ratios and higher
forecasted growth rates.
S&P 500 is a market-capitalization-weighted index of 500 common
stocks chosen for market size, liquidity, and industry group
representation to represent U.S. equity performance.
Russell 1000 Value Index is a market-capitalization-weighted index
designed to measure the performance of the large-cap value
segment of the U.S. equity market. It includes those Russell 1000
Index companies with lower price-to-book ratios and lower expected
growth rates.
RANKING INFORMATION
© 2020 Morningstar, Inc. All rights reserved. The Morningstar
information contained herein: (1) is proprietary to Morningstar
and/or its content providers; (2) may not be copied or
redistributed; and (3) is not warranted to be accurate, complete or
timely. Neither Morningstar nor its content providers are
responsible for any damages or losses arising from any use of this
6 |PORTFOLIO MANAGER Q&A | AS OF MAY 31, 2020
Manager Facts Mr. Devitt earned his bachelor of science degree in business
information systems from University College Cork in Ireland, and
John Stone is a portfolio manager and U.S. Equity group leader his master of science degree in finance from Boston College. He
at Strategic Advisers LLC, a registered investment adviser and a is also a CFA® charterholder.
Fidelity Investments company. Fidelity Investments is a leading
provider of investment management, retirement planning,
portfolio guidance, brokerage, benefits outsourcing, and other
financial products and services to institutions, financial
intermediaries, and individuals.
In this role, Mr. Stone is responsible for overseeing the U.S.
Equity investment strategy. Additionally, he manages a variety of
funds, including Strategic Advisers Core Fund, Strategic Advisers
Growth Fund, Strategic Advisers Value Fund, Strategic Advisers
Core Multi-Manager Fund, Strategic Advisers Growth Multi-
Manager Fund and Strategic Advisers Value Multi-Manager
Fund, as well as the U.S. Equity sub-portfolios for certain
Fidelity® Wealth Services (FWS) (formerly Fidelity Portfolio
Advisory Service), Fidelity Charitable Gift Fund Legacy Pool, and
the 529 Multi-Firm portfolios.
Prior to assuming his current responsibilities, Mr. Stone served
as a portfolio manager at Mercer Investments. Previously, he was
an investment analyst at Pyramis Global Advisors, a Fidelity
Investments company. Mr. Stone also worked as an investment
associate at Devonshire Investors and as a Fidelity management
trainee. He has been in the investments industry since first
joining Fidelity in 1993.
Mr. Stone earned his bachelor of science degree in quantitative
economics from Tufts University and his master of business
administration degree from Cornell University's Johnson
Graduate School of Management. He is also a CFA®
charterholder.
Niall Devitt is a portfolio manager at Strategic Advisers LLC, a
registered investment adviser and a Fidelity Investments
company. Fidelity Investments is a leading provider of
investment management, retirement planning, portfolio
guidance, brokerage, benefits outsourcing, and other financial
products and services to institutions, financial intermediaries,
and individuals.
In this role, Mr. Devitt is responsible for overseeing the U.S.
Equity sub-portfolios for certain Fidelity® Wealth Services (FWS)
(formerly Portfolio Advisory Service) index-focused products.
Additionally, he serves as a co-manager on the Strategic
Advisers Core Fund and Strategic Advisers Growth Fund.
Prior to assuming his current position in October 2017, Mr.
Devitt held various roles within Strategic Advisers, including
team leader, research analyst, and research associate.
Previously, Mr. Devitt worked at Fidelity Tax Exempt Services
Company as a systems analyst and as a systems associate. He
has been in the investments industry since joining Fidelity in
2001.
7 | For definitions, fund risks and other important information, please see the Definitions and Important Information section of this Q&A.PERFORMANCE SUMMARY: Annualized
Quarter ending June 30, 2020 1 3 5 10 Year/
Year Year Year LOF1
Strategic Advisers Growth Fund
24.34% 17.33% 14.25% 15.91%
Gross Expense Ratio: 0.62%2
1 Lifeof Fund (LOF) if performance is less than 10 years. Fund inception date: 06/02/2010.
2 This expense ratio is from the prospectus in effect as of the date shown above and generally is based on amounts incurred during that fiscal year. It
does not include any fee waivers or reimbursements, which would be reflected in the fund's net expense ratio.
Past performance is no guarantee of future results. Investment return and principal value of an investment will fluctuate; therefore, you may have a
gain or loss when you sell your shares. Current performance may be higher or lower than the performance stated. Performance shown is that of the
fund's Retail Class shares (if multiclass). You may own another share class of the fund with a different expense structure and, thus, have different
returns. To learn more or to obtain the most recent month-end or other share-class performance, visit fidelity.com/performance. Total returns are
historical and include change in share value and reinvestment of dividends and capital gains, if any. Cumulative total returns are reported as of the
period indicated.
Before investing in any mutual fund, please carefully consider Information included on this page is as of the most recent calendar
the investment objectives, risks, charges, and expenses. For quarter.
this and other information, call or write Fidelity for a free S&P 500 is a registered service mark of Standard & Poor's Financial
prospectus or, if available, a summary prospectus. Read it Services LLC.
carefully before you invest. Other third-party marks appearing herein are the property of their
respective owners.
Past performance is no guarantee of future results.
All other marks appearing herein are registered or unregistered
Views expressed are through the end of the period stated and do not trademarks or service marks of FMR LLC or an affiliated company.
necessarily represent the views of Fidelity. Views are subject to change at
Fidelity Brokerage Services LLC, Member NYSE, SIPC., 900 Salem Street,
any time based upon market or other conditions and Fidelity disclaims any
Smithfield, RI 02917.
responsibility to update such views. These views may not be relied on as
investment advice and, because investment decisions for a Fidelity fund Fidelity Distributors Company LLC, 500 Salem Street, Smithfield, RI
are based on numerous factors, may not be relied on as an indication of 02917.
trading intent on behalf of any Fidelity fund. The securities mentioned are © 2020 FMR LLC. All rights reserved.
not necessarily holdings invested in by the portfolio manager(s) or FMR Not NCUA or NCUSIF insured. May lose value. No credit union guarantee.
LLC. References to specific company securities should not be construed
709469.12.0
as recommendations or investment advice.
Diversification does not ensure a profit or guarantee against a loss.You can also read
