Growth Rating 2026: Fidelity Asian Values

Managers Nitin Bajaj and Ajinkya Dhavale note the Portfolio of Fidelity Asian Values (FAS) is currently at its most extreme positioning in terms of valuation and quality versus its benchmark in their tenure. This is largely a result of their highly disciplined, bottom-up approach, which the managers simplify as looking for good businesses, run by good people and at a price that offers a margin of safety amongst their universe of Asian smaller companies. Recently, this approach has identified a broad range of opportunities within the Indonesian market, which has derated due to broader macro issues, leading to several mis-priced opportunities. By contrast, the rally in the wider region, driven in part by technology, has led to the managers rotating out of several holdings, notably in China, into better value ideas.

The broad rally in the region has been beneficial to absolute Performance though, with the managers also outperforming in this environment thanks to their strong stock selection. The underweight in India has also contributed, as well as the sizeable allocation to Chinese stocks. However, as a result of the strong market performance, the managers note valuations are elevated and have taken their short exposure to near its upper limit with the aim of generating alpha should these see a pullback (see Gearing).

The focus on cash generation when selecting stocks, as well as tweaks to the charging structure, have contributed to an increase in distributable revenue, enabling a sizeable increase in the Dividend. The trust now yields c. 3.4%, considerably more than the index, which is supported by sizeable revenue reserves.

In our view, the contrasting performance of Asia’s two key economies, China and India, over the past c. 18 months has provided the ideal backdrop for demonstrating the benefits of FAS’s approach. The managers’ strict valuation discipline led to an underweight in India and overweight in China ahead of their pullback and rally, respectively, around September 2024. This has contributed to a strong period of Performance in both relative and absolute terms as the broader market has also rallied, whilst also generating considerable alpha as a result of the contrarian positioning.

With this in mind, the recent Portfolio changes are likely to further differentiate the trust versus comparators. The additions to Indonesia, a country arguably overlooked by many investors, mean the portfolio looks very different to both the benchmark and peers, offering the potential for future alpha. Nitin and Ajinkya note the country has many of the strong underlying fundamentals that supported India’s initial rally, as well as the valuation issues of China prior to September 2024, which makes for a compelling narrative in our view.

Further adding to the alpha potential is the higher level of short positions in the trust, relative to its history (see Gearing). We understand these are predominantly focussed on technology-led firms where fundamentals do not support their premium valuations, meaning that the trust has the potential to deliver strong relative performance should the sector see a pullback, putting it in stark contrast to many other investors in the space.

For all these reasons, we believe FAS could provide investors considerable diversification potential as part of a wider portfolio, as well as generating significantly differentiated returns.