The global fund that could benefit from lower interest rates

The key issue for investors this year is likely to revolve around the timing and extent of any cuts to interest rates. A number of reductions have already been priced in, but once the central banks get going and establish a new direction of travel it could have a big impact on the investment landscape.

Lower interest rates would be advantageous for a lot of different areas including dividend paying stocks, whose income would become more attractive. A prime beneficiary would be Fidelity Global Dividend Fund, which is a member of Fidelity’s Select 50 list of handpicked funds and one of Tom Stevenson’s fund picks for the year.

What does the fund invest in?

Fidelity Global Dividend offers defensive, high-quality exposure to income paying shares from around the world. Manager Dan Roberts has a cautious and rigorous approach, which is why it typically does well in more difficult market conditions.

Roberts looks for companies that offer a healthy yield supported by a rising level of income and that have the potential for capital growth. A lot of emphasis is placed on the sustainability of the dividend and whether the current share price provides an adequate margin of safety. Environmental, Social and Governance (ESG) considerations are also taken into account.

The underlying portfolio

At the end of December the portfolio contained 42 stocks and was significantly underweight in both the US and information technology relative to its benchmark. It is unusual as there was no exposure whatsoever to the Magnificent Seven — Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia and Tesla — that were responsible for most of the gain in the US indices last year, but which could struggle if there is a rotation of leadership.

Instead of these overcrowded trades, the fund is materially overweight in Europe and the UK, with the most favoured sectors being industrials and financials. Almost 95% of the assets are invested in stocks worth more than £10bn, with the largest positions including the likes of: RELX, Deutsche Boerse, Unilever and Roche.

Fidelity Global Dividend Fund top 10 holdings

1. RELX 
2. Deutsche Boerse 
3. Unilever 
4. Roche 
5. Sanofi 
6. BlackRock  
7. Legrand 
8. Iberdrola 
9. Novartis 
10. Omnicom

Source: Fidelity International, as at 31 December 2023

How has it performed?

Roberts aims to achieve capital growth over the long-term, while also providing an income. In the five years to the end of December 2023, the fund generated a cumulative return of 56.4%, compared to 73.9% by its MSCI ACWI benchmark¹.

Important information - investors should note that the views expressed may no longer be current and may have already been acted upon. The Fidelity Global Dividend Fund invests in overseas markets so the value of investments could be affected by changes in currency exchange rates. The fund also invests in emerging markets which can be more volatile than other more developed markets. The Fidelity Global Dividend Fund uses financial derivative instruments for investment purposes, which may expose the fund to a higher degree of risk and can cause investments to experience larger than average price fluctuations. The fund invests in a relatively small number of companies so may carry more risk than funds that are more diversified. Tax treatment depends on individual circumstances and all tax rules may change in the future. Select 50 is not a personal recommendation to buy or sell a fund. The Key Information Document (KID) for Fidelity and non-Fidelity funds is available in English and can be obtained from our website at www.fidelity.co.uk. This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to one of Fidelity’s advisers or an authorised financial adviser of your choice.