The Upside: Inside the Fidelity Canadian Long/Short Alternative Fund with Reetu Kumra

[00:00:00] Emily Anonuevo: Hello, everyone, and welcome to The Upside. I'm your host Emily Anonuevo. As 2026 rolls along markets are taking shape in different ways that could expand investor opportunities into alternative investing themes. Fidelity's Canadian Long/Short Alternative Fund provides that opportunity into the alternative space by investing in Canadian equities with long and short positions and also harnessing the power of Fidelity research team. Portfolio manager and Director of Research, Reetu Kumra, joins me in the studio today to expand on the fund, how it could diversify an investor's portfolio, plus where she's seeing opportunities right now here at home in Canada. Welcome, Reetu, and welcome back into the studio.

[00:00:40] Reetu Kumra: Thank you so much for having me.

[00:00:42] Emily Anonuevo: Wonderful to have you here, ready to dive in. Before we get into the Canadian Long/Short Alternative Fund why don't you just lay the foundation for our investors watching in terms of major market movers this year as we get into the new year. What major market themes are you keeping an eye on this year?

[00:01:02] Reetu Kumra: That's a great question to start off with. Let's just take a step back with where we were before we came into 2026. Going back to 2025 it was very much an interesting market, very volatile, started off the year with very much a risk-off environment where the focus was the tariffs, reshoring, lack of immigration. Shortly after Liberation Day all of a sudden the market went very risk-on where the narrative then became, wait, tariffs aren't gonna be as bad as we originally thought, there's monetary and fiscal stimulus down the pipes and the AI trade is very much alive.

[00:01:40] As we turn the page into 2026 there are a few things that we have in mind. First and foremost, the AI theme. Here in Canada we have very few ways to play AI. We can play it through hardware, can play it through nuclear or power names or even uranium, or potentially industrial names that are tied to the AI theme. That's not necessarily what the market is focused on. The market's more so focused on a different angle, that is what is AI going to disrupt? Coming into this year we have seen quite a bit of volatility in terms of the market questioning the terminal growth rate of some of these sectors, whether it is software, alternative asset managers, information services, commercial real estate brokers, just to name a few.

[00:02:37] Beyond AI the second theme that we have in mind, actually in conjunction with AI, is rising geopolitics. Between AI and rising geopolitics we can see a path to a CapEx cycle, which effectively means a hard asset cycle. Between the build out of the data centres, unfortunately, the world is actually getting smaller so trade diversification is very topical. Infrastructure spend is very important. We see a lot of countries actually hoarding or building their inventory up of critical minerals which is all causing hard assets to do very well.

[00:03:15] The third theme that I wanted to mention was dedollarization, which is effectively why we've seen gold do so well. If we think about why gold has done so well, it's diversification away from the US dollar, it's central bank buying, it's the monetary and fiscal stimulus that I talked about, it's the question of rising debt levels at a sovereign level, as well as central bank independence. You take those themes and that's against an economy that's actually doing quite well. If you think about GDP growth here in Canada we're muddling through, in the US we're expected to have between 3% and 4% GDP growth. We're seeing PMIs over 50 for the first time, both services and manufacturing. The consumer is hanging in there. Inflation is under control. We're lapping the tariff narrative. We're in a monetary and fiscal easing environment. All that to say is that the investment team is very much focused on what we do best and we're trying to stock pick our way through this volatility.

[00:04:17] Emily Anonuevo: Wow, incredible overview there. Like you said, AI will still be a big theme this year. Obviously, geopolitical concerns and risks around the world and, like you mentioned, dedollarization. Leading into my next question about Canada and opportunities here and what's piquing your interest, Canada fared really well in 2025, showing a lot of resilience when it came to the impact of US trade tariffs. Is that going to continue on as a theme this year, Reetu, and what other sectors are piquing your interest?

[00:04:51] Reetu Kumra: Absolutely. Again, let's take a step back. I just find it very interesting that just a short few years ago the market loved to not like Canada, for legitimate reasons. We had concerns about the levered consumer, the wall of mortgage maturities, lack of productivity here, anemic growth. The setup in Canada didn't feel that good but then 2025 happened and the market returned over 30%, which is one of the best performing indices globally. You may have heard me say this before but the way I think about the TSX is not that it's a stock market but a market of stocks. If you actually decompose the TSX, we have roughly 36 to 37% in resources, including 15% in gold. I just had made a case for why resources have done well and why they can continue to do well. We have another 40% in interest rate sensitives and in a monetary easing environment that could be very much a tailwind. The remaining of the TSX is in very much sectors that are stock picking sectors. We have the consumer, health care, industrials, tech. You have the ability to kind of stock pick your way through the sector because there are the haves and the have nots in those sectors. As a result, you can see why the market has done so well and why there's a case for Canada on a go-forward basis.

[00:06:18] Emily Anonuevo: Absolutely. What I'm hearing is materials, industrials, and natural resources to keep an eye out in Canada. Now, continuing with the Canadian theme, this is the perfect time to highlight that the Canadian Long/Short Alternative Fund is celebrating its two year anniversary. Remind the folks on the line, Reetu, what this fund is all about and what kind of strategy and approach does it involve?

[00:06:44] Reetu Kumra: Absolutely. So the Fidelity Canadian Long/Short Alternative Fund is a 130/30 long/short product that effectively has the ability for an investor to actually own our research here in Canada.

[00:06:58] Emily Anonuevo: A great way to put it.

[00:07:00] Reetu Kumra: The genesis of this fund actually came out of a study that we did back in 2019 where, as you can imagine, here at Fidelity we have a ton of data on our research. Our risk and quant team, they helped us dissect that data and really understand if there are any sort of systematic patterns in our research. What we came out with is that we do a good job of picking our long-only idea, our buy-rated names. We actually do that with remarkable accuracy and consistency. We actually do an even better job of picking our sell-rated names. What that led to is the idea of creating a product such that we can go long on our buy-rated names and go short on our sell-rated names so we can actually capture the full excess returns being generated by our research.

[00:07:51] We do that in a very systematic way where we use our rules-based approach so that we can really manage our returns while having consistent risk metrics over time. A little bit of a less known fact about this fund is actually it tilts small-cap. The average market cap of the TSX is roughly 45 billion and the average cap of this fund is roughly 10 billion, give or take. You could argue that you're being exposed to an arguably less efficient part of the market.

[00:08:24] Emily Anonuevo: Really interesting point there about tilting more small-cap and, like you said, harnessing the power of Fidelity's research team. I know when you launched this two years ago that was the unique trait about it, that you can capture the long and short side and, obviously, our years of research and research ratings. What kind of investor would this fund appeal to? More conservative investor, risky investor? Where would you categorize it?

[00:08:55] Reetu Kumra: The way I consider this fund is I really just consider this a core Canadian 130/30 long/short product. You get directional alignment to the Canadian market but you also get the opportunity to own our research because we go long on our buy-rated names, we go short on our sell-rated names, so you can really capture that accuracy, the consistency and that repeatability of our research process.

[00:09:19] Emily Anonuevo: If you want to own the research here at Fidelity this fund could be for you. Now, Reetu, you joined Fidelity back in 2012 as an equity research analyst. You're now the director of research and portfolio manager. You have an interesting background. I know that you didn't initially start in finance. I believe your main focus was statistics. How does that background still come into play today in your line of work, and how did you sort of make your way into the financial services industry?

[00:09:52] Reetu Kumra: Good question. I did start off in statistics and mathematics. I did my master's in statistics with the idea that I really wanted to approach investing from a quantitative lens. Over time that deviated. After I did my MBA I decided that I wanted to do more fundamental equity research. That's how I started my career at Fidelity, on the fundamental equity research side. I was an analyst for a number of years, covered a number of sectors, rotated around the TSX like every analyst does, covering Canadian securities. Fast forward to today and looking at this fund, I think my background really complements what this fund is all about. This fund is an intersection between our systematic, rules-based approach which lends well to my background in statistics and mathematics, but it also combines the fundamental equity research that we have in-house which lends well to background here at Fidelity. I feel like this fund, it's really resonated with me.

[00:10:56] Emily Anonuevo: Are you still keeping the learning tools and learning methods that you had as an equity research analyst, obviously, in your role as PM, obviously, all the research, all the reading you have to do, all the homework you have do on the companies, plus, obviously, dipping into all the research resources we have here at Fidelity, still helps you to this day, I imagine.

[00:11:17] Reetu Kumra: Absolutely. Once an analyst, always an analyst.

[00:11:21] Emily Anonuevo: Can you break down how the research team here at Fidelity functions, it's main purpose and how you sort of navigate that team.

[00:11:31] Reetu Kumra: I have the absolute privilege of helping to build, develop, and mentor an amazing group of analysts. I do this in conjunction with my co-DOR, Steve MacMillan. Effectively, these individuals are people and investors that come into work with one purpose in mind, that is to be the best analyst in their respective sector so that they can bring their research output into the funds to benefit our fundholders. Here at Fidelity we have analysts covering roughly 25 stocks a piece. What they're doing is they're trying to put a mosaic together of all the research that they do. Just to name off some of the things that they do, they're doing industry research, they're doing company research, meeting with management teams, going to conferences, building models, forecasting profitability and cash flow, dissecting balance sheets, looking at valuation, talking to experts, this is just to name a few things. They do that 25 times over and they're constantly trying to maintain their theses to see if anything changes over time and if our position should change over time accordingly.

[00:12:42] This group is a magnificent group of individuals that have the fire to make sure we're generating alpha for our fundholders. The reason we choose to have in-house experts and such a large team is that we feel that if you can go deeper into your research it'll help you and it'll help our fundholders with position sizing, figuring out what we should go long versus what we should go short, and then also just helping us generate the alpha so we can beat the benchmark. Especially during volatile times like we've seen in the last several years, time is money so  having these in-house experts and our research analysts, it really speaks volumes and it really helps.

[00:13:27] Emily Anonuevo: Reetu, you mentioned how we have a large in-house team of research analysts. How does that give us a cutting edge against other firms, would you say?

[00:13:38] Reetu Kumra: I would say size, sheer size is is so important. The fact that we have so many analysts covering US and Canadian securities here based in Toronto is very helpful because they have the time to go knee-deep into the analysis that we do. To give you a flavour of what that size looks like, we have between 20 and 25 analysts in Canada covering Canada and the US, we have another team based in London covering US securities, not to mention the analysts that we have globally. They have the ability to do that analysis, to turn over that extra stone so that we can bring that alpha to our fundholders.

[00:14:19] Emily Anonuevo: Huge competitive edge there, for sure. Now, Reetu, you've been with Fidelity for a long time, I'm just curious to know what do you love most about your job and what keeps you motivated in this line of work day in and day out?

[00:14:34] Reetu Kumra: For me, I come to work every day with a purpose, whether that is helping Canadians feel more financial security or it's helping develop our future PMs on the team. For me, it's twofold. It's just having that purpose in what I do is just what drives me.

[00:14:54] Emily Anonuevo: Just lastly, if I can put this question to you, Reetu, as we wrap up the show, for the investors watching today, whether they're a new investor or seasoned investor, as we roll into 2026 what do you think they should keep top in mind in terms of where they see investment opportunities and their interests lie. What would you say?

[00:15:15] Reetu Kumra: I think 2026 will be very similar to what we've seen in prior years and it will be full of volatility. It's these kind of environments where we do best because we're able to stock pick our way through it both on the long and the short side.

[00:15:28] Emily Anonuevo: Absolutely. Reetu, always a pleasure to have you here in the studio. Thank you so much for joining me today.

[00:15:32] Reetu Kumra: Thank you for having me.

[00:15:33] Emily Anonuevo: And thank you for watching The Upside. For more investor content be sure to subscribe to our YouTube page so you never miss an episode. Plus sign up for our Upside newsletter for alerts to upcoming shows. Remember, working with a financial advisor is the best investment you can make on your financial journey. For The Upside I'm Emily Anonuevo.