The Upside: How Fidelity pros find opportunity around the world

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Subtitles are AI-Generated.

 

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Hello everyone, and welcome to The Upside.

 

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I'm your host, Hannah Klein.

 

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Fidelity kicked off 2026 with the launch of a new liquid alternative fund.

 

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Positioned to adapt this flexible long/short strategy is built on deep

 

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fundamental analysis to help navigate changing conditions across market

 

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cycles. Aptly named Fidelity Global Opportunities Long/Short

 

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Fund invests across geographies, sectors and market caps to

 

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expand opportunities and enhance diversification.

 

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This equity strategy typically runs with 135% long exposure

 

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and 35% short exposure, meaning that this fund has the

 

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ability to benefit from stocks going up on the long side as well as stocks

 

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falling in price through the short portfolio.

 

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The result, a fund that aims to provide risk mitigation while giving investors

 

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access to a differentiated source of returns.

 

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Joining me today are portfolio managers, Nicolas Bellemare and Max Adelson.

 

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Thank you.

 

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Thanks for having us.

 

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Great to have you.

 

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We're going to dive right into it.

 

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We're currently facing big changes in the investment market.

 

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Let's talk about why this fund and from a timing perspective

 

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why is this more important than ever for investors?

 

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Sure, let me start with a question.

 

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When you look at your stock portfolio is it built for today's world

 

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or yesterday's? Because the world has changed a whole lot but a

 

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lot of stock portfolios haven't.

 

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Investing was fairly straightforward for the past 10, 15 years.

 

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If you invested in the largest companies in the US you did well.

 

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Those companies dominated and concentration worked.

 

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When concentration works passive investing also works pretty well.

 

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But things are changing. A few areas that Max and I have been looking at

 

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are that a lot of industries that were left for dead are

 

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coming back to life.

 

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Believe it or not, areas like European steel, commodities,

 

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old school industrials, are leading the market again.

 

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Why is that the case?

 

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Well, because the West is building stuff again and they want to do it right

 

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at home so that's bringing back a lot of sectors

 

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that were previously treading water.

 

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Number two, the AI opportunity is spreading.

 

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While you could do very well in AI a few years ago with some

 

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of the best known names, those internet giants, the

 

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names that are represented at the top of the index, these days they're spending

 

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huge sums of money to build those AI models and that money is flowing through

 

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all sorts of areas of the market, mostly in international market

 

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and smaller companies or less well-known companies that

 

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make the components that go in those data centres, that power those, even the

 

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equipment that makes the chips that is used to run AI.

 

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That is fundamentally different.

 

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The last thing is that yesterday's sure thing isn't so sure anymore.

 

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Again, those internet giants have been working for a long time but their

 

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business model is changing.

 

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They're going from capital-light to now spending huge amounts of money and

 

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facing a more competitive environment.

 

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That Mag7 has increasingly become the Lag7 in our view.

 

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You're seeing the leadership rotate and shift.

 

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Some industries that were also seen as safe, like software, professional

 

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services, or information businesses, are being

 

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disrupted by AI. That's a whole lot of change, many portfolios haven't

 

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changed, but this is where the Global Opportunities Long/Short is

 

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starting an interesting conversation.

 

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It's an active fund so we can change when the world changes.

 

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When industries go from bad to good or vice versa we can change

 

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with it. As you mentioned, it's long and short so we can find not only

 

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winners and benefit when stocks go up but also benefit when stocks go down

 

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by shorting those stocks.

 

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It's global so we can go wherever the best opportunities are,

 

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even if it's not in the US, and we're increasingly seeing those opportunities

 

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being outside the US.

 

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This is an interesting solution for those that, yes, need to own equities

 

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to reach their long term goals but want to do it in

 

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a different way that's built for today's world.

 

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Very interesting. Well, it is quite a time for that and no

 

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time like the present to launch your first fund.

 

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This is both of your debut fund but you've been a part of the investment team

 

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here at Fidelity for well over a decade now.

 

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Max, maybe you can tell us a bit about your road to becoming the portfolio

 

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managers of this fund.

 

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We are new with this product to market, the Fidelity Global

 

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Opportunities Long/Short Fund.

 

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Nic and my relationship investing in global markets is anything but new.

 

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We started in 2010 together at McGill University.

 

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We were part of the investment management program.

 

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That program involved running a student-run investment

 

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fund. We had $2 million of capital, which at the time seemed

 

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like a huge amount. We had the opportunity to invest that and

 

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visit our investors. In fact, a little story about Nic and I, when we went

 

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to visit one of our first investors one of the critiques that we got was we

 

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were not taking enough risk because we were so diligent and risk

 

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averse at the time. Markets were coming out of the global financial crisis

 

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and it was time to ratchet up the risk.

 

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That helped Nic and I see both sides of an issue.

 

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We joined Fidelity in 2012 as research

 

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analysts. We sat next to each other for 10 years in that role,

 

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experienced some of the same investment events together but covering different

 

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sectors from healthcare to energy, technology,

 

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banks and diversified financials.

 

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We got exposure across different types of industries and

 

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we got to look primarily in Canada, also beyond.

 

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That's what brought us to this point.

 

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In 2023 we started what would ultimately become

 

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Fidelity Global Opportunities Long/Short. We sat down

 

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with this blank piece of paper and talked about the very themes that Nic

 

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just mentioned, what's changing in the world and where investors have to

 

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position as we go forward.

 

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We also leveraged on some of our prior strengths, some of the things that we

 

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had done before, going back to 2010 investing in global markets.

 

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We also decided to incorporate the short side of

 

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the portfolio in order to take advantage not just of our best ideas

 

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but also the worst ideas that we can find across the complex.

 

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This go-anywhere strategy is one that Nic and I developed and

 

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built a process around from 2023 through 2025, and

 

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we brought it to market today in 2026.

 

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Incredible. You two have a long history of working together, sitting beside

 

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each other, collaborating.

 

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Maybe we can talk a bit about your dynamic now.

 

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You're listed as co-portfolio managers, can you share what that means for how

 

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decisions are made on this fund and how you work with one another?

 

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That's a great question because we work differently than many co-managed funds.

 

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A lot of them, maybe they split responsibilities, someone does long, someone

 

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does short, or maybe they work on two different sleeves that are brought

 

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together. We're different in that we work on every single

 

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idea together. No stock makes it in the portfolio without one of us

 

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convincing the other that it's a good idea, and no stock stays in the portfolio

 

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without both of us defending it.

 

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The reason this is so powerful is that we have complementary perspectives.

 

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Max is a really strong value investor.

 

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He has an eye for those beaten down stories that are starting to turn around.

 

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I'm more of a growth investor. I like to find a quality business that can get

 

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much bigger than people expect.

 

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Those two perspectives coming together are precisely what makes our

 

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strengths because we're able to hold stocks through their

 

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entire transformation from cheap, unloved stocks to

 

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exciting growth stories.

 

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That's where you find not only the stocks that can go up 20, 40% but sometimes

 

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can double, triple, go up 5x or even 10x,

 

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as was the case for one of the stocks that we've owned

 

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in the strategy over the last few years.

 

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It started as a stock that Max found.

 

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Not surprising because it wasn't a story that sounded

 

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the greatest at the time. It was more of a value stock, their balance sheet was

 

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a little bit shaky, they had product issues.

 

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It was a power equipment company and at

 

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that time the outlook for new gas plants wasn't, frankly, that rosy.

 

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He convinced me things were starting to change at the margin, their bad

 

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contracts were rolling off, the demand was stabilizing.

 

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So we bought it, started working, but shortly we realized that

 

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as AI was proliferating and all these data centres were being built, and they

 

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are very power hungry, that we were much too conservative in

 

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our estimates of where power could go.

 

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As a growth investor I started asking not only what can go wrong but also what

 

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can go right with that stock.

 

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Those two perspectives helped us enter early in the stock and hold it through

 

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its entire transformation and see the stock price rise

 

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by tenfold.

 

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That is the power of us working together and

 

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those two perspectives coming together in building the portfolio.

 

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I want to highlight that because what Nic said is so important.

 

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Being able to hold a stock through the life cycle, it's very difficult

 

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for a sole manager with just a value discipline or just a growth

 

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discipline to capture both of those phases of a cycle.

 

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Another example besides the equipment maker that Nic spoke about

 

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was early on as we were tracking the developments in artificial

 

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intelligence there was a lot of capacity in the supply chain to build more

 

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and more products.

 

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We could identify that there were parts of the supply chain that were not

 

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operating at capacity. Conditions were weak.

 

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I identified a company that I thought was very interesting.

 

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The current fundamentals were not very good and so I brought Nic to

 

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the meeting with the company and we walked through the business,

 

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started to understand the trends.

 

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We had a nice little discussion afterwards and decided that

 

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it was the right type of opportunity to put in our portfolio.

 

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Critically, once things started to tighten up demand came back, utilization

 

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rose. Nic could see where this was going further down

 

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the line. He could take it from a value thesis into a growth thesis,

 

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allowed us to keep the position and benefit from the upside as it

 

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started to come into the numbers.

 

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On that theme of investors, many investors look at liquid alternatives,

 

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which is a fairly new sub-market in the Canadian investing space,

 

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and wonder where these investments fit into their portfolio.

 

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So how are you thinking about investors using this fund while you were building

 

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it over the past few years?

 

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That's a great question because when some people hear alternatives they

 

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may think it's something exotic or risky.

 

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Let me be very clear. This is an equity fund.

 

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As you mentioned on the outset, we build it by basically

 

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having a high net exposure to the market because we think owning stocks

 

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in the long term is the best way to compound wealth.

 

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We just do it differently than a traditional fund.

 

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For $100 invested in the fund we may own $135 in

 

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our best long ideas, and go short $35 of stories

 

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that we think are cracking.

 

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The net exposure there would still be $100 to the market, the same as if you

 

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own an index fund. The way we get there is different.

 

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We own both so that we can generate return from both stocks that go up

 

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but also by shorting stocks that goes down.

 

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The benefits of that for investors are twofold.

 

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Number one, more opportunities to generate returns because, again,

 

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we can go with stories that go from bad to good but also

 

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good to bad. Number two, it also reduces the volatility.

 

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When markets get choppy our short book tends to fall more than our longs

 

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which dampens some of those returns in

 

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volatile markets. That's exactly what we've demonstrated through the years

 

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managing the pilot where we've been able to beat the market with lower

 

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volatility. How to think about this in the context of an investor's

 

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portfolio? While this is still an equity product, if

 

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you need equities to reach your long term goals this can absolutely be part of

 

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it. As we discussed, a lot of equity portfolios haven't changed

 

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that much over the years but the world has changed a lot so this

 

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is an opportunity to diversify where those returns come from,

 

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different opportunities, different geographies, better risk management.

 

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It's a great place for those that want to be invested in equities but don't

 

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want to have all their eggs in the same basket.

 

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It's been just over a month since this fund launched publicly, however, you've

 

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both mentioned that this was run as a pilot for three years prior, and

 

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in prior conversations I've heard you mention that you're looking for areas

 

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where markets are set to surprise.

 

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Can you give us an example of how you've seen this play out?

 

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Absolutely. It's been an eventful month.

 

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Nic and I were just talking about this over the weekend where we were

 

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reflecting on some of the past events that we've lived through.

 

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It always seems at the time as if what's being experienced is unprecedented.

 

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Unprecedented things therefore happen all the time.

 

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What we try to do, as you mentioned, is anticipate where

 

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things could surprise.

 

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That's where the big returns are focused.

 

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We try to identify things as they're developing and spot them.

 

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An example would be last year when Liberation Day happened.

 

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That was a major change to markets.

 

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What was happening under the surface were some of the things that Nic spoke

 

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about earlier. Reshoring had been a theme for a number of years, supply

 

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chain diversification had been a theme for a number of years, and we

 

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found an area of the market in the materials industry where

 

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a new bottleneck had formed right then and there.

 

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We're able to take a position quickly because we communicate so much

 

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and saw the upside thereafter.

 

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A similar example more recently, of course, everyone knows of the events

 

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in the Middle East, how they're impacting energy markets.

 

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It was last year that we started to identify how materials markets

 

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had tightened up and energy markets had not yet gotten to

 

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that point. The community of analysts was generally quite negative

 

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on energy markets talking about oversupply.

 

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We saw the same risks around oversupply.

 

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We were generally focused on how were things shifting, how things are

 

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changing, and starting to see a little bit better risk-reward dynamics in

 

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that space. Fortunately, we were positioned as the catalyst

 

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hit. We try to see them as early as possible.

 

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That's really our process in action. Some change happens.

 

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While a lot of people in the market may be frozen or do the obvious, we

 

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ask where's the big change that's not appreciated by the market.

 

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It can bring us to areas that are not so obvious in

 

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the moment.

 

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The thing is, as Max mentioned, those changes are happening more and more

 

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frequently. Industries are being transformed by technology,

 

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supply chains are being rebuilt, the market is broadening, so this is a

 

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great time to be active, to be able to change with the market as industries

 

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transform, to be be able pick both opportunities on

 

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the long and short side as the number of winners and losers seem

 

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to increase at a fast velocity these days, and

 

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to go global because the opportunity set is  increasingly across borders.

 

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That is really the sort of environment we've built this fund for.

 

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Excellent. Well, I'm wishing you both many more hidden gems and the journey has

 

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just begun with this public fund.

 

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Thank you so much for joining me in the studio today.

 

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It's been great to have you. And thank you all for watching.

 

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Thanks for watching today and I hope you'll join us again soon.

 

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I'm Hannah Klein.

 

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Thanks for listening to, or watching, Fidelity Canada's The Upside Podcast.

 

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We'll wrap things up today with a quick disclaimer.

 

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The views and opinions expressed on this podcast are those of the participants

 

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and do not necessarily reflect those of Fidelity Investments Canada ULC or its

 

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affiliates. This podcast is for informational purposes only and should not

 

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be construed as investment, tax, or legal advice.

 

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It is not an offer to sell or buy or an endorsement, recommendation or

 

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sponsorship of any entity or security cited.

 

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Read a fund's prospectus before investing. Funds are not guaranteed.

 

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Their values change frequently and past performance may not be repeated.

 

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Fees, expenses and commissions are all associated with fund investments.

 

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Thanks for tuning in. We'll see you next time.