As a long-term investor, he looks for resilient companies with staying power and doesn’t chase fads. He tries to avoid firms that lack an enduring competitive advantage, steers clear of those loaded up with too much debt, and scrutinizes their leadership’s integrity and prowess. The strategy stands out for its sprawling portfolio of 800-plus stocks drawn from across the globe and market-cap spectrum. Once solidly small-cap-focused, it now orients toward mid-caps but distinguishes itself from that category by owning an above-average stake of large caps (34% of assets) and small caps (30%). Its generous helping of European and Japanese firms, which have tended to enhance the strategy’s risk-adjusted returns, also sticks out.

Altogether, foreign stocks regularly soak up more than 35% of the portfolio, typically the highest share in the category. Tillinghast’s partiality for high-quality fare reveals itself through the portfolio’s average returns on equity, which are far higher than the Russell Midcap Value Index’s, and its aggregate debt/capital ratio, which is consistently lower. Tillinghast’s risk-conscious approach doesn’t have much of a thrill factor. It can lead to results that lag well behind its peers during bull markets.

Yet the strategy’s typically subdued volatility and durability in market drawdowns have consistently made up for its seemingly pedestrian results in rallies. Over the past decade through April 2021, its Sharpe ratio (a measure of risk-adjusted returns) beat 95% of funds in either the small- or mid-cap categories (excluding growth funds). The strategy’s ability to maintain its edge, despite its massive asset base of more than $41 billion, underscores its advantages.

The fund’s older version has posted phenomenal absolute and risk-adjusted returns under Joel Tillinghast, who has managed it for more than three decades. From its 1989 inception through April 2021, the fund gained 13.7% annualized, among best showings of any surviving fund in the mid- or small-cap categories. It exhibited lower volatility than relevant benchmarks and the average midvalue and mid-blend fund (its current and former category, respectively) despite an above-average foreign-equity stake. The fund has also consistently preserved capital better than its rivals during stress periods.

For example, during 2020’s pandemic-induced bear market (Feb. 21-March 23), the fund dropped 36.6% versus the Russell Midcap Value Index’s 43.7% loss. The fund’s resilience and steady gains have reliably made for outstanding risk-adjusted returns, despite its at-times less-than-thrilling total returns.

The fund’s gains only matched the index over the past decade, but earned its returns with an ample cash cushion and steadier returns. The strategy’s girth does make outperformance more difficult than in the early years; Tillinghast cannot invest as easily in the smalland mid-cap fare that he favors. He’s done better at Fidelity Series Intrinsic Opportunities FDMLX, which is his smaller, more nimble fund available for investment only by other of Fidelity’s products

Source:Morningstar

Disclaimer

General Advice Warning

Any advice/ information provided is general in nature only and does not take into account the personal financial situation, objectives or needs of any particular person.