An overweight to Hong Kong and China has eaten into the performance of the £224m Fidelity Global Property fund, according to manager Dirk Philippa.
Year to date, as of September 21, the fund had lost 6.2 per cent, compared with the IA Property sector’s return of 0.8 per cent, data from FE Analytics shows.
Mr Philippa, who took over the vehicle two years ago, said this was because of his 6 per cent overweight to Hong Kong.
The territory is the manager’s third-largest allocation by country.
It made up 11.2 per cent of his fund at the end of August, compared with a benchmark weighting of 6.6 per cent.
Stocks in the autonomous territory suffered this summer as the market reversal in China took its toll. However, Mr Philippa is confident in his positions in Hong Kong.
“The underlining fundamentals are great and it’s a position I intend to hold,” he said.
“Whenever there is a correction you don’t know if it’s going to be by 10, 20 or 25 per cent.
“The balance sheets are fine and [the companies] don’t have exposure to development projects.”
The manager has been eyeing the market for opportunities given his optimistic outlook on the country.
He said that some of the companies were trading at “unwarranted” levels and “over time they should correct”. But he has yet to buy more stocks in the country in this cycle.
“I’ve not made any changes since the recent correction… prices are continuing to fall quite significantly and that’s why it’s not good to try and be a hero yet,” Mr Philippa said.
“I want to be careful with my exposure, [and] if I buy it would be a small amount. It’s a market that is not for the faint of heart.”
He also holds two positions in China, which make up 2.5 per cent of his portfolio in total.
The manager has not looked to add to those positions as he finds the country “a more complicated market” than Hong Kong.
But one area that he has added to since August is Japan.
He had previously cut back the “big overweight” he had to the country in 2012 and 2013, but has begun adding again.
Japan is now his second-largest allocation by country, making up more than 12 per cent of the fund.
Mr Philippa has also been reducing his underweight to the US.
“We’ve seen quite a steep correction since February/March time and that has offered quite a few opportunities,” he said.
Areas he likes in the country include apartments, single family houses and shopping centres.
