With global wealth shift, ‘there’s always a bull market somewhere’

Fidelity's Simnegar sees huge investment opportunities in decline of developed markets, rise of emerging ones

When you manage an international equity strategy, it helps to believe, as Sammy Simnegar does, that “there’s always a bull market somewhere — you just have to find it.”

As manager of the $850 million Fidelity International Capital Appreciation Fund Ticker:(FIVFX), Mr. Simnegar has been finding his fair share of late. Mostly, he’s been placing bets on consumer themes in both developed and emerging markets.

With regard to Europe, for example, the fund is neutral, with a 30% weighting. Even though Mr. Simnegar anticipates more-sluggish growth for most of the eurozone, he isn’t shying away from European companies with international exposure. “Right now, we are massively underweight domestic Europe and overweight international Europe,” he said. “About a year ago, we started to reassess our exposure to Europe because they are looking at a multiyear deleveraging process.”

The flip side of that process in parts of Europe and the United States represents more growth and development in emerging-markets economies, he said. “Money will always reach for yield, and that means yields [in the emerging economies] are coming down.” In turn, consumption is on the rise. “The general theme is the ongoing shift of wealth from developed to emerging economies,” he said.

The fund, which Mr. Simnegar has been managing since January 2008, has the flexibility to go essentially anywhere in terms of both geography and market capitalization.
The portfolio of about 200 stocks has a current market cap range of between $100 million and $200 billion.

Developed Europe is the largest weighting, followed by the emerging markets at 25%, the United States at 15%, and Japan and the United Kingdom each at 10%.

Following a Fidelity Investments policy, Mr. Simnegar refused to discuss specific portfolio positions, but he emphasized his confidence in consumer spending in various markets around the world. “We are heavily exposed to Chinese consumer consumption,” he said.

As for eating his own cooking, Mr. Simnegar represents a rare and extreme example by putting “100% of my 401(k) money in this fund,” in addition to “six figures of my personal money.”

The fund is up 13.6% from the start of the year, which compares with a 6.1% gain by the MSCI EAFE Index. The foreign large-cap-growth category average, as tracked by Morningstar Inc., has gained 8.1% from the start of the year.

Portfolio Manager Perspectives are regular interviews with some of the most respected and influential fund managers in the investment industry. For more information, please visit InvestmentNews.com/pmperspectives .