FOCUS 2026: Expanding the alpha landscape with Global Opportunities Long/Short

Glen Davidson: [00:00:00] We're going to talk about something new and exciting. I know you're really thrilled about it, and so is Nic Bellemare and I'm sure he's watching. Global Opportunity Long/Short Fund and ETF launched on January 23rd. That's pretty exciting. The last time I spoke to you you were an analyst. I want to get into your time as an analyst and what led to you becoming a portfolio manager on January 23rd. Before we get there, I understand you wanted to be a meteorologist for a large part of your educational life. I'm curious if that's because you wanted to get a job where you could be wrong all the time and still keep your job, or if it's because you'd actually rather be doing what you're doing and not be wrong. What was the story?

Max Adelson: [00:00:40] Well, meteorology is something that I became fascinated in as a young child. My first business I was running a snow removal business for my neighbours. That made me very interested in when it was going to snow, naturally. It also gave me a flavour for entrepreneurship. That started this ball rolling where I just had an incredible depth of interest in how the weather worked. I did some strange things like travel to hurricane zones to see how that would all unfold and learn a little bit more. I went to school to be meteorologist. It happened that I had some very interesting experiences, met a lot of great people at school. Nic Bellemare, my co-portfolio manager, was one of them, who helped me transition into the world of investing. What I realized was that there are a lot of similarities between the weather and investing. You mentioned making forecasts and being wrong some of the time, that is certainly one of them. The other element is taking in a lot of information, a lot of data and being able to synthesize that to some kind of outcome. That's what naturally allowed me to make the switch.

Glen Davidson: [00:01:58] You're also a very, very, very inquisitive person. I'm sure that makes for some really interesting company meetings where you're meeting with outside companies and really grilling them. Can you talk about how that all came about for you?

Max Adelson: [00:02:12] Maybe I should start right from the beginning of how I started meeting companies. In 2012 I joined Fidelity as an analyst. I came in fresh perspective. They gave me the role of covering the energy sector which was kind of exciting for me because I had this background in meteorology so natural gas, there tended to be this connection with the weather. I remember about three months into the job, sent to Calgary to meet with all of the energy companies, all of the management teams, hearing out their strategies, seeing their offices, which is very interesting when you wanna get to know the culture of a business, what they care about and what they don't care about, and having this open-ended discussion with them that allowed me to later make better recommendations for our portfolio managers in allocating who are the best companies in the space.

Glen Davidson: [00:03:08] Talk about how you and Nic came together from school but then also at Fidelity, he was an inspiration to you as far as this industry, but then how you became portfolio managers together.

Max Adelson: [00:03:21] Nicolas Bellemare is my co-portfolio manager on the Global Opportunities Long/Short Fund. I wish he could be here to be with us, just happens that his wife gave birth a couple days ago so you got me today. Nic is an individual who I have known for 15 years. I met him at McGill where we both went to school. We were part of the investment management program there. When I met Nic, I'll be honest, Glen, I was intimidated. Nic  knew from a very young age that he wanted to be an investor. He was investing in companies early on, he was reading Peter Lynch, he's got amazing stories about that, and he was participating on campus giving his ideas away, telling other people to buy his strong investment ideas. I looked at him and I said, I want to work with this guy. That's what got the ball rolling in the investment management program.

[00:04:21] While we were there we were part of a student-led investment fund called Desautels Capital Management. We had $2 million of capital to invest with a global mandate, very similar to some of the work we do today. We had the opportunity not just to invest that but to travel to New York, Boston, Toronto, and pitch to our investors, ask them to participate in the fund, get their concerns and share with them our ideas.

[00:04:47] Now, I started working with Nic  at Fidelity in 2012 when we became analysts. Nic, at the time, was covering the technology and healthcare sector. I was covering energy. We more or less grew up in this industry together, apprenticing, effectively, working with all the portfolio managers, many of whom you've seen over the course of the day yesterday and today. It was an incredible experience for me to have this other person learning alongside me and, effectively, share our ideas. If we weren't ready to go to a portfolio manager with an idea because it was a little half-baked we could bounce it off each other. It started to build this rapport. Now it's hard to believe it's been 15 years. We started working on the fund in pilot phase in 2023. We commercialized it, as you mentioned, just a few months ago.

Glen Davidson: [00:05:45] When a fund is run in a pilot that's Fidelity saying, here's some money, it's internal money, you've got an idea, run it behind the scenes, and let's see if it actually works as planned. That was the last, you said three years ago?

Max Adelson: [00:06:02] Yes. We got together with the business at the start of 2023 and we put together a strategy with a clean sheet of paper. We looked at many of the different attributes of attractive fund structures and what we wanted to do that was going to be different. Nic and I, having been Canadian analysts and co-managing the Fidelity Canadian Disciplined Equity Fund, required us to look at both overweight positions and underweight positions, it required us to put buy and sell recommendations on stocks. We realised that those sell recommendations had a lot of value that may not have been fully recognized in portfolios. That became a central part of how we designed this fund. We said, how do we take advantage of not just our best ideas but our worst ideas as well.

[00:07:00] We also wanted a mandate that allowed us to look for the best ideas wherever they may be found in the world. As we all know, not every kind of business is represented in one country of domicile. In fact, today, sometimes you look at a business where it's headquartered or listed and you say, it has nothing to do with the country where it is. We wanted to take that geographic constraint off and think a little bit more substance over form.

Glen Davidson: [00:07:32] That's interesting. The two of you brought the idea to the firm and said, let's pilot this, here's our belief. I'd love to talk more to the audience about this, the research that you do about buys, you also have to look at the research you do about what should be sold. It creates a scissor chart, doesn't it, what they call a scissor chart, graphically, I'll do this. It's really about the performance that you and Nic should have achieved, which you obviously did because you got the fund, which is your buy recommendations should go up and to the right and your sell recommendations should go down and to the right, and you create this scissor. That actually came about and resulted in you getting this fund.

[00:08:11] I just want you to know I also did some research about you with a couple of people who are important to you. One is Darren Lekkerkerker who sits in your pod, the other is your boss, Andrew Marchese, both said that you were very thoughtful, very pragmatic, and as we can tell, cool, calm, and collected. Are there other attributes that you think you brought to the table to allow for the creation of this portfolio?

Max Adelson: [00:08:36] Other attributes.

Glen Davidson: [00:08:36] And do you believe those points that I just made?

Max Adelson: [00:08:39] I believe them to an extent. I think there's always things that we can improve upon. Maybe it's a moment to just talk about the partnership that I have with Nic. Temperamentally we have some differences and we bring different attributes to the table. As I mentioned, Nic and I, we had the privilege of working with portfolio managers like Darren, like Andrew, like Mark Schmehll, like Dan Dupont who was just on stage here. We noticed that these portfolio managers had some very significant strengths and some areas of weakness. We looked at where can we bring the most number of strengths as a partnership. You're a function of all of your experiences throughout your life.

[00:09:31] I mentioned that Nic started at Fidelity covering as an analyst the technology sector, healthcare sector which was in a bull market at the time. I covered energy, I watched oil go from $80 to $120 to $50 a barrel and the whole sector fall out of favour. As a result, it may not be surprising that Nic became a little bit more on the optimistic growth side and I became a little bit more on the cautious defensive side. We attempt to be as thoughtful around that as a partnership as we possibly can. That's important to know about our fund if you're thinking about it as a potential investor. We think about it when we come to an idea is this a value situation, is it a growth situation? A little bit like triage nurses at a nursing station, what's the patient?

[00:10:29] What we noticed, for instance, is if we're dealing with a value situation chances are the people who are involved are a little bit like Dan Dupont, who was just on stage, very patient, very calm, they're willing to wait. When you have a value situation often you can have some time. Opposite situation, if you're dealing with a growth opportunity you see how fast some of those types of investors can move. Darren, you mentioned him, I sit next to him, remarkable how fast his mind works and how quick he can move. We use that to try and diagnose the type of situation we're dealing with so that we can make a better decision.

Glen Davidson: [00:11:13] Let's get into the fund. It's global, it's long/short, tell us about it.

Max Adelson: [00:11:20] I would say sometimes the best opportunities, they are found on page 14 of the newspaper. They're not on the front page because the best opportunities are often not obvious. They can be buried. What Nic and I developed was a strategy to look at what is going on in the world and try to think a little bit half step ahead to the extent that we can. We don't want to go too quickly, we don't wanna go too slow, we want to go at the right pace to find where are the best value opportunities, where are the best growth opportunities. When I think about it, think about is Fidelity Global Opportunities Long/Short means three things. Global, these are our best ideas from around the world no matter where they are found.

Glen Davidson: [00:12:14] Because it's stock specific, not market specific.

Max Adelson: [00:12:17] It is stock specific. Two, short selling, our worst ideas because that's what enhances portfolio returns and it allows us to buy more of our best ideas. Lastly, as I mentioned, to try and capture the not obvious opportunities, to try to find what's on page 14, to make sure we're not stuck in the past, to ensure that we are present right now, Nic and I developed this new investment approach, one that doesn't bias too far in the direction of value or growth.

Glen Davidson: [00:12:57] When you look at today's very calm market, talk about the positioning since the January 23rd launch date based on the market that we're in today.

Max Adelson: [00:13:10] Markets are in a great position, have been in a great position, let's say. Returns have been very strong so why is there any reason to have concern? There's risk, geopolitics, technology disruption, market concentration. When we look at markets it's rare in history to have seen an instance where we have so much market cap concentrated into so few names. This is on the order of what was seen in the Nifty 50, 1920s, '20s followed by the '30s, '60s followed by the '70s, we know how that story can go. Dan talked about it a little bit earlier. We have to talk about AI  because it is so crucially important. Our number that we've come to is around 1 trillion of data centre spend in 2027. US GDP is just over 30 trillion so we are approaching 3% of GDP.

[00:14:24] Just to put that in perspective, yesterday I was flying into Phoenix and I looked down and I see the road system and I see these massive interstate highways criss-crossing the city. You think, that's a big investment, that must have been very costly. The interstate highway system was 0.5% of GDP. Railroads, when they were built peaked out 10% of the GDP. When we talk about AI is it going to look more like the interstate system, ultimately, or is it going to look more like the railroads? If it's the interstate system we have a problem, there's too much investment there. If it's the railroads we've got a whole lot more to go and we've got to stay open-minded.

[00:15:12] What Nic and I try to do, we know as investors we are taking risk no matter what we do. If we own cash we're vulnerable to inflation. Bonds, vulnerable to inflation. If we get in on AI we're vulnerable to it being the interstate system. We're looking for where can we find the best risk-reward. Fortunately, our mandate being global allows us to navigate in really interesting ways. How do we come into the year? We're looking for two things. One, those wallet share gainers in the data centre spend. If you roll the clock back a few years, 2023, there was really only one company who was benefiting from all this spend. We all know who that was. Fast forward a few years suddenly many more companies are benefiting. What the world needs to build this shifted from one thing to the next to the next. we're always trying to look for the next one.

[00:16:15] I can give you a story of how sometimes that means we can do some very powerful things together. A few years ago we came across this European industrial company. Let's take you really far away from AI. European industrial company, old world, operates very slowly. Company was in a really bad position, they had recently taken government bailout money, things look very poor, basically nothing was going right, which is really interesting for me as a value investor because I go, it's a little bit the basement window, how far can you fall? I started a dialogue with our European analyst located in London getting better sense for what was really going on. What was special to me was that he had an incredible depth of understanding of the life cycle of what this company had been through. He followed them for several years. He was optimistic on how things could get better.

[00:17:19] Eventually, I convinced Nic, him being a growth investor, eventually I convinced him we need to have this in our portfolio because if the call option, if things work out it can be pretty interesting. He sort of reluctantly, okay, let's test this out. We take initial position. Things start to turn. Results get better. They repay the government. Results get better again. Numbers are improving. Then my instinct becomes, as a value investor, this is approaching fair value, maybe we should start to think differently about this. Do we need to exit? That's the power of the combination of the two of us. Nic can start to see the growth angle. He goes, hey, look, see what they make. This might end up in the data centre. This might end up in an area of growth.

[00:18:12] That stock since has been a 10 bagger for us. That's how we own something for the entire life cycle. It's having the two different perspectives in one portfolio. Now, fortunately, as he saw this we doubled the position as well. When we can both see something we will take a larger position than if it's just one of us.

Glen Davidson: [00:18:32] It's very, very complementary the way the two of you are working. You talked about working with the analyst as well who was in the UK. Do you and/or Nic get out and travel to see companies as well or rely on the research and deal with it all from Toronto?

Max Adelson: [00:18:47] We do, we do as much as we can. One of the places I'm very excited to go for my first time later this month is China. We have a team on the ground there and they are on top of the latest and greatest in Chinese companies. Now, China is a very small part of what we do. As a global benchmark we are mostly in developed markets. A few months ago it came to us that it was impossible to ignore what was going on there. We started learning about companies coming out with new products. We came across a company that makes semi trucks. They're selling them for half of what it costs to buy a Western produced truck. We see similar things in construction equipment. We see similar things in batteries. We all know how China caught up very quickly in AI with DeepSeek.

[00:19:39] Geopolitics is something that makes this very tricky to navigate. It also creates a lot of really interesting opportunities.  I just said we cannot ignore this. We have to learn about what's going on there and figure out how that impacts our other holdings. We also travel to meet the analysts around the world. We look at it as there's two of us. We have twice the horsepower because there's two of us but there's only 24 hours in a day. Markets are only closed for roughly three hours of our day because they will open in Asia around 7:30 p.m., close in North America at 4:00. We, to the best of our ability, use the resource that we have in these over 100 analysts sitting around the world. Many of these analysts know their companies extraordinarily well. They know them on a first name basis. That's how we get up to speed very quickly. It's also how we take some interesting ideas across borders.

[00:20:44] I can give you an example of that. I talked about our shorting. Now, I'll get into a little bit around the shorting process later but sometimes we find these really interesting insights that we can put to use. A few years ago when the initial AI boom was happening we saw that there were some companies that were being associated with AI that were tangentially related, and their numbers were extraordinary. They looked really good to a growth investor. One of the companies happened to be building servers, they were just packaging the GPUs. It was more or less a commoditized service but the margins they were earning were really high. We're going, okay, what's really going on? This is an American company, what is really going? All of a sudden we get it from our research analyst in Asia. We look at how they had an exclusive on packaging GPUs because they had taken the risk on an earlier product generation from the producer of the GPUs. We learned that there was an expiry date on that contract so we knew, we knew earnings were gonna turn. That's how we put that to use in the short portfolio. Insight learned in Asia, action in a US security.

Glen Davidson: [00:22:03] Let's talk more about that just based on time. I do want to dig into the short strategy because there's complexities around that. It's exciting to hear about this because you and Nic have the world at your disposal but you also have both sides of the trade at your disposal. The shorting side, because of the complexity side of it we should dig into more.

Max Adelson: [00:22:25] We definitely have to talk about the shorting side. At the beginning of the session we talked about how as analysts we learned the significance of an underweight position, how if we didn't own something and it went up it hurt us, it hurt the fund managers. That taught us a little bit about shorting. We learned the discipline of sell ratings. Once you put this into a portfolio you have to be very thoughtful about it. I'll say a few things about our shorting process. Maybe just first by show of hands here, how many of you guys have seen the movie The Big Short? Okay, a lot of hands go up. Our process is not like that. The reason is very specific. The participants in The Big Short, many of them did extraordinarily well because they had the right timing on when the housing crash actually happened. If they were too early they got stopped out. If they were too late they also got stopped out. That's a wonderful Hollywood story to tell, what wasn't told is how many people were not able to successfully make that trade, despite having the idea and getting the fundamentals right. You can get run over if you are not cautious on how you short.

[00:23:46] Here's how we do it. We have a diversified basket of short positions. At any one time we are likely around 60 individual short positions in our portfolio. Our long/short will have a net exposure of close to 100%. That means we are effectively as exposed to equity markets as a traditional equity fund. We are short selling about 30% of the NAV in these 60 companies. That's 0.5% per company. Why? Because as we all know the dosage makes the poison. If you are too early that short position can multiply and wipe out your returns. If you're too late these short positions often have very, very violent rallies. It can be extraordinarily hard to hold onto them. We will entertain a big short idea. I would love to have the next Enron in the short portfolio. We have a team in London who specializes in short selling and we will have some of those in the portfolio.

[00:24:58] We will also have a lot of companies we describe as third quartile. These are businesses where it's not good. They do not have a position to outperform the market but it is not so bad that they have to make a change. These are the ideas that can help fund our long positions. The performance from the shorting has been a major contributor to our returns. Here's the other thing about it, Glen. Over the history of the stock market the majority of returns come from just a handful of companies. The average stock will underperform, therefore, shorting is very simple, it's just not easy.

Glen Davidson: [00:25:38] You sound like a real student of the past. You use very good analogies to history and I think that's really important. You've learned a lot. Will you use cash as a defensive position?

Max Adelson: [00:25:49] Our net exposure which effectively measures the cash over time has been as low as 85%. That's like as if we had a maximum of 15% cash. That's the maximum. We've generally been in the 90 to 100% net exposure. The philosophy behind it is quite simple. There is a bull market somewhere. Our job is to find it for you, our clients. Because we have the globe there's really no excuse for us not to be finding those interesting opportunities. Now, there can be times when we think something is risky and it's early so we might use short positions to maybe mitigate our exposure to it before we think it's time to have the full exposure but for the most part for the portfolio this is very much an equity-like product and we feel that it solves certain issues that are faced in markets today like market concentration.

Glen Davidson: [00:26:58] Makes a lot of sense. We just have a minute left so on top of what you just said leave our audience with some thoughts on why this makes sense within a client's portfolio.

Max Adelson: [00:27:08] Global Opportunities Long/Short was created for two reasons. One, to protect investor returns and two, to grow. What is the issue? The issue is the risk. The issue is technological disruption, geopolitical conflict and extraordinary market concentration. We propose that the lens that got us to finding yesterday and today's performers, going forward it's not enough. We need an additional lens to find the winners of tomorrow. That's what Fidelity Global Opportunities Long/Short does. That is our purpose. We all know that we cannot drive forward by looking in the rear view mirror.

Glen Davidson: [00:28:04] Makes sense. Thank you. That was a very, very thorough overview. Congratulations to you, congratulations to Nic, and on the birth of Nic's baby. We're all gonna be very interested to see this play out to fruition. It's gonna be wonderful to see. Thanks very much.