This fund that targets gains from special events and is benchmarked against the Russell 3000. It has returned 4.44% year-to-date.
Fidelity Event Driven Opportunities (FARNX)
from Fidelity Monitor & Insight
In the case of Fidelity Event Driven Opportunities (FARNX), you can’t really consider performance as it’s just 17 months old. Instead, we’re making a statement in our Unique Opportunities Model that we believe in two things: the fund’s investment strategy and the 32-year-old manager who conceived and is implementing it.
Arvind Navaratnam is only the second Fidelity manager to incubate his investment thesis there before launching it as a retail stock fund. Inside Fidelity, expectations are high. The manager told us that he and his wife have all of their personal wealth in this unique portfolio.
FARNX is the only Fidelity offering benchmarked against the broad Russell 3000—which Arvind admits to ignoring with respect to portfolio composition. (The index accounts for 98% of the stock market’s capitalization.) What Arvind does pay particular attention to is one-off opportunities (events), especially spinoffs and other corporate restructurings. For example, when large companies are forced to sell off smaller divisions (especially those whose shares are chased by passive capital through indexing), he says there can be mispricing because the sale is often misunderstood by the market. (This process leads to the fund’s small-cap value orientation, though we currently classify its style as mid-blend.)
Second, there’s “unleashed entrepreneurism” by the spun-off managers. Arvind calls this a “dual value proposition,” though he cautions that it can take years (“not even one year is a good metric”) for the stock to “fully” outperform. The fund’s official turnover rate is 109%, though he says that his average holding period will be closer to two years.
Granted, Arvind’s record is modest so far. But we believe his approach will play out over time.
Jack Bowers, John M. Boyd and John Bonnanzio, Fidelity Monitor & Insight, www.fidelitymonitor.com, 800-397-3094, May 2015