Why FEAAX Could Be on Your Shortlist


Mar. 7 2016, Updated 4:56 p.m. ET

Fidelity Advisor Emerging Asia Fund performance

In this article, we’ll outline the performance of the Fidelity Advisor Emerging Asia Fund Class A (FEAAX), which is one of the classes available for retail investors. The fund is invested in the stocks of companies such as H shares of China Telecommunicatons (CHA), H shares of China Petroleum & Chemical (SNP), Advanced Semiconductor Engineering (ASX), China Biologic Products (CBPO), and Shinhan Financial Group Company (SHG).

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From a purely net asset value return standpoint, FEAAX had a forgettable run in both the one-year period until February 29, 2016, and in 2015. It stood ninth and tenth, respectively, in its peer group for the aforementioned periods.[1. When we refer to the peer group, we mean the group of 12 funds chosen for this review.] For return comparison, we’ve chosen two ETFs: the iShares MSCI All Country Asia ex Japan ETF (AAXJ) and the WisdomTree Asia Pacific ex-Japan ETF (AXJL).

For evaluating benchmark-related metrics, we’ve chosen AAXJ as the benchmark for all funds in this review, as it tracks the MSCI All Country Asia ex Japan Index.

Other metrics

FEAAX’s standard deviation, or its volatility of returns, in the one-year period until February 29 was 18.3%. This was sharply higher than both AAXJ’s 17.9% and the peer group’s average of 16.5%.

The fund’s risk-adjusted returns, calculated via the Sharpe Ratio, were negative for both the one-year period ended February 29 as well as for 2015. Evaluating a negative Sharpe Ratio may be misleading, so we’ll avoid that.

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FEAAX’s information ratio, calculated with AAXJ as the benchmark, was 1.36 for the one-year period ended February 29, ranking it third among the 12 funds in this review. The information ratio shows the consistency of a fund manager and measures his ability to generate excess returns over a benchmark. The higher the reading, the better the consistency. For 2015, the fund’s information ratio ranked it fourth among its peers.

A note to investors

Apart from consistency in returns, the fund also showed its alpha generation ability. Its alpha for the one-year period ended February 29 ranked it second among its peers, while its alpha for 2015 placed it fifth. The fund’s quantitative metrics have been good in the year-to-date 2016 period as well.

The only concern is the high volatility of its returns. However, until its risk-adjusted performance is good, investors are being compensated for this higher volatility. FEAAX’s point-to-point return performance is poor, but its risk-adjusted metrics make it a contender for your shortlist of funds investing in the region.

In the next article, we’ll look at the Fidelity Emerging Asia Fund (FSEAX).


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