Investment Objective

The Constituent Fund aims to produce returns that are related to those achieved on the major bond market indices by focusing investment in debt securities globally (including emerging markets). The Constituent Fund intends to limit the volatility of returns in the short term. The Constituent Fund is a feeder fund that invests in Fidelity Global Investment Fund (“FGIF”) – World Bond Fund, which in turn invests in FGIF – Global Bond HK$ Hedged Fund and FGIF – Global Bond Fund. Please refer to the investment objective for details of the fund.

Fund Details

Latest Fund Expense Ratio: 1.48%

Launch Date(dd/mm/yyyy): 08/07/2003

Unit Price: HKD 15.610

Fund Size: HKD 1,553.04M

Fund Commentary

Fixed income markets posted mixed returns over the quarter, with government bonds outperforming corporate bonds. Financial markets witnessed unprecedented levels of volatility, with the spread of the COVID-19 epidemic beyond China, and an oil price crash as the Organization of the Petroleum Exporting Countries’ (OPEC) talks with Russia to reduce output collapsed. Global central banks reacted promptly with new policy responses. The US Federal Reserve (Fed) slashed rates to near zero. The entire US Treasury yield curve fell below 1% for the first time in March 2020. German bunds and UK government bond (Gilt) yields followed their US counterparts. Government bond yields rose for a brief period before falling sharply on the announcement of quantitative easing measures by major G20 economies, while credit spreads continued to widen. Curves steepened as countries across the globe announced a string of fiscal easing packages to support the population. Emerging market bonds posted negative returns over the quarter with all three sub-asset classes posting double digit negative returns. The fund generated positive returns over the quarter. Fund’s duration (measure of its sensitivity to interest rate changes) position enhanced returns as core government bond yields fell as investors flocked towards safe haven assets. In this respect, overweight stance in US dollar, and Norwegian Krone duration contributed to returns. Fund’s underweight stance in government bonds of Spain contributed to returns as major G20 economies announced widespread fiscal stimulus to combat the effects of the coronavirus epidemic, which kept the peripheral markets under pressure. However, small allocation to corporate bonds weighed on performance as credit spreads widened.

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