The Upside: How Fidelity pros find opportunity around the world

[00:00:41] Hannah Klein: Hello everyone, and welcome to The Upside. I'm your host, Hannah Klein. Fidelity kicked off 2026 with the launch of a new liquid alternative fund. Positioned to adapt this flexible long/short strategy is built on deep fundamental analysis to help navigate changing conditions across market cycles. Aptly named Fidelity Global Opportunities Long/Short Fund invests across geographies, sectors and market caps to expand opportunities and enhance diversification. This equity strategy typically runs with 135% long exposure and 35% short exposure, meaning that this fund has the ability to benefit from stocks going up on the long side as well as stocks falling in price through the short portfolio. The result, a fund that aims to provide risk mitigation while giving investors access to a differentiated source of returns. Joining me today are portfolio managers, Nicolas Bellemare and Max Adelson.

[00:01:37] Max Adelson: Thank you.

[00:01:38] Nicolas Bellemare: Thanks for having us.

[00:01:39] Hannah Klein: Great to have you. We're going to dive right into it. We're currently facing big changes in the investment market. Let's talk about why this fund and from a timing perspective why is this more important than ever for investors?

[00:01:54] Nicolas Bellemare: Sure, let me start with a question. When you look at your stock portfolio is it built for today's world or yesterday's? Because the world has changed a whole lot but a lot of stock portfolios haven't. Investing was fairly straightforward for the past 10, 15 years. If you invested in the largest companies in the US you did well. Those companies dominated and concentration worked. When concentration works passive investing also works pretty well. But things are changing. A few areas that Max and I have been looking at are that a lot of industries that were left for dead are coming back to life. Believe it or not, areas like European steel, commodities, old school industrials, are leading the market again. Why is that the case? Well, because the West is building stuff again and they want to do it right at home so that's bringing back a lot of sectors that were previously treading water.

[00:02:53] Number two, the AI opportunity is spreading. While you could do very well in AI a few years ago with some of the best known names, those internet giants, the names that are represented at the top of the index, these days they're spending huge sums of money to build those AI models and that money is flowing through all sorts of areas of the market, mostly in international market and smaller companies or less well-known companies that make the components that go in those data centres, that power those, even the equipment that makes the chips that is used to run AI. That is fundamentally different.

[00:03:32] The last thing is that yesterday's sure thing isn't so sure anymore. Again, those internet giants have been working for a long time but their business model is changing. They're going from capital-light to now spending huge amounts of money and facing a more competitive environment. That Mag7 has increasingly become the Lag7 in our view. You're seeing the leadership rotate and shift. Some industries that were also seen as safe, like software, professional services, or information businesses, are being disrupted by AI. That's a whole lot of change, many portfolios haven't changed, but this is where the Global Opportunities Long/Short is starting an interesting conversation.

[00:04:13] It's an active fund so we can change when the world changes. When industries go from bad to good or vice versa we can change with it. As you mentioned, it's long and short so we can find not only winners and benefit when stocks go up but also benefit when stocks go down by shorting those stocks. It's global so we can go wherever the best opportunities are, even if it's not in the US, and we're increasingly seeing those opportunities being outside the US. This is an interesting solution for those that, yes, need to own equities to reach their long term goals but want to do it in a different way that's built for today's world.

[00:04:51] Hannah Klein: Very interesting. Well, it is quite a time for that and no time like the present to launch your first fund. This is both of your debut fund but you've been a part of the investment team here at Fidelity for well over a decade now. Max, maybe you can tell us a bit about your road to becoming the portfolio managers of this fund.

[00:05:10] Max Adelson: We are new with this product to market, the Fidelity Global Opportunities Long/Short Fund. Nic and my relationship investing in global markets is anything but new. We started in 2010 together at McGill University. We were part of the investment management program. That program involved running a student-run investment fund. We had $2 million of capital, which at the time seemed like a huge amount. We had the opportunity to invest that and visit our investors. In fact, a little story about Nic and I, when we went to visit one of our first investors one of the critiques that we got was we were not taking enough risk because we were so diligent and risk averse at the time. Markets were coming out of the global financial crisis and it was time to ratchet up the risk. That helped Nic and I see both sides of an issue.

[00:06:02] We joined Fidelity in 2012 as research analysts. We sat next to each other for 10 years in that role, experienced some of the same investment events together but covering different sectors from healthcare to energy, technology, banks and diversified financials. We got exposure across different types of industries and we got to look primarily in Canada, also beyond. That's what brought us to this point. In 2023 we started what would ultimately become Fidelity Global Opportunities Long/Short. We sat down with this blank piece of paper and talked about the very themes that Nic just mentioned, what's changing in the world and where investors have to position as we go forward. We also leveraged on some of our prior strengths, some of the things that we had done before, going back to 2010 investing in global markets. We also decided to incorporate the short side of the portfolio in order to take advantage not just of our best ideas but also the worst ideas that we can find across the complex. This go-anywhere strategy is one that Nic and I developed and built a process around from 2023 through 2025, and we brought it to market today in 2026.

[00:07:27] Hannah Klein: Incredible. You two have a long history of working together, sitting beside each other, collaborating. Maybe we can talk a bit about your dynamic now. You're listed as co-portfolio managers, can you share what that means for how decisions are made on this fund and how you work with one another?

[00:07:43] Nicolas Bellemare: That's a great question because we work differently than many co-managed funds. A lot of them, maybe they split responsibilities, someone does long, someone does short, or maybe they work on two different sleeves that are brought together. We're different in that we work on every single idea together. No stock makes it in the portfolio without one of us convincing the other that it's a good idea, and no stock stays in the portfolio without both of us defending it. The reason this is so powerful is that we have complementary perspectives. Max is a really strong value investor. He has an eye for those beaten down stories that are starting to turn around. I'm more of a growth investor. I like to find a quality business that can get much bigger than people expect. Those two perspectives coming together are precisely what makes our strengths because we're able to hold stocks through their entire transformation from cheap, unloved stocks to exciting growth stories.

[00:08:40] That's where you find not only the stocks that can go up 20, 40% but sometimes can double, triple, go up 5x or even 10x, as was the case for one of the stocks that we've owned in the strategy over the last few years. It started as a stock that Max found. Not surprising because it wasn't a story that sounded the greatest at the time. It was more of a value stock, their balance sheet was a little bit shaky, they had product issues. It was a power equipment company and at that time the outlook for new gas plants wasn't, frankly, that rosy. He convinced me things were starting to change at the margin, their bad contracts were rolling off, the demand was stabilizing. So we bought it, started working, but shortly we realized that as AI was proliferating and all these data centres were being built, and they are very power hungry, that we were much too conservative in our estimates of where power could go. As a growth investor I started asking not only what can go wrong but also what can go right with that stock. Those two perspectives helped us enter early in the stock and hold it through its entire transformation and see the stock price rise by tenfold. That is the power of us working together and those two perspectives coming together in building the portfolio.

[00:10:03] Max Adelson: I want to highlight that because what Nic said is so important. Being able to hold a stock through the life cycle, it's very difficult for a sole manager with just a value discipline or just a growth discipline to capture both of those phases of a cycle. Another example besides the equipment maker that Nic spoke about was early on as we were tracking the developments in artificial intelligence there was a lot of capacity in the supply chain to build more and more products. We could identify that there were parts of the supply chain that were not operating at capacity. Conditions were weak. I identified a company that I thought was very interesting. The current fundamentals were not very good and so I brought Nic to the meeting with the company and we walked through the business, started to understand the trends. We had a nice little discussion afterwards and decided that it was the right type of opportunity to put in our portfolio. Critically, once things started to tighten up demand came back, utilization rose. Nic could see where this was going further down the line. He could take it from a value thesis into a growth thesis, allowed us to keep the position and benefit from the upside as it started to come into the numbers.

[00:11:23] Hannah Klein: On that theme of investors, many investors look at liquid alternatives, which is a fairly new sub-market in the Canadian investing space, and wonder where these investments fit into their portfolio. So how are you thinking about investors using this fund while you were building it over the past few years?

[00:11:42] Nicolas Bellemare: That's a great question because when some people hear alternatives they may think it's something exotic or risky. Let me be very clear. This is an equity fund. As you mentioned on the outset, we build it by basically having a high net exposure to the market because we think owning stocks in the long term is the best way to compound wealth. We just do it differently than a traditional fund. For $100 invested in the fund we may own $135 in our best long ideas, and go short $35 of stories that we think are cracking. The net exposure there would still be $100 to the market, the same as if you own an index fund. The way we get there is different. We own both so that we can generate return from both stocks that go up but also by shorting stocks that goes down. The benefits of that for investors are twofold.

[00:12:34] Number one, more opportunities to generate returns because, again, we can go with stories that go from bad to good but also good to bad. Number two, it also reduces the volatility. When markets get choppy our short book tends to fall more than our longs which dampens some of those returns in volatile markets. That's exactly what we've demonstrated through the years managing the pilot where we've been able to beat the market with lower volatility. How to think about this in the context of an investor's portfolio? While this is still an equity product, if you need equities to reach your long term goals this can absolutely be part of it. As we discussed, a lot of equity portfolios haven't changed that much over the years but the world has changed a lot so this is an opportunity to diversify where those returns come from, different opportunities, different geographies, better risk management. It's a great place for those that want to be invested in equities but don't want to have all their eggs in the same basket.

[00:13:40] Hannah Klein: It's been just over a month since this fund launched publicly, however, you've both mentioned that this was run as a pilot for three years prior, and in prior conversations I've heard you mention that you're looking for areas where markets are set to surprise. Can you give us an example of how you've seen this play out?

[00:13:58] Max Adelson: Absolutely. It's been an eventful month. Nic and I were just talking about this over the weekend where we were reflecting on some of the past events that we've lived through. It always seems at the time as if what's being experienced is unprecedented. Unprecedented things therefore happen all the time. What we try to do, as you mentioned, is anticipate where things could surprise. That's where the big returns are focused. We try to identify things as they're developing and spot them. An example would be last year when Liberation Day happened. That was a major change to markets. What was happening under the surface were some of the things that Nic spoke about earlier. Reshoring had been a theme for a number of years, supply chain diversification had been a theme for a number of years, and we found an area of the market in the materials industry where a new bottleneck had formed right then and there. We're able to take a position quickly because we communicate so much and saw the upside thereafter.

[00:15:04] A similar example more recently, of course, everyone knows of the events in the Middle East, how they're impacting energy markets. It was last year that we started to identify how materials markets had tightened up and energy markets had not yet gotten to that point. The community of analysts was generally quite negative on energy markets talking about oversupply. We saw the same risks around oversupply. We were generally focused on how were things shifting, how things are changing, and starting to see a little bit better risk-reward dynamics in that space. Fortunately, we were positioned as the catalyst hit. We try to see them as early as possible.

[00:15:47] Nicolas Bellemare: That's really our process in action. Some change happens. While a lot of people in the market may be frozen or do the obvious, we ask where's the big change that's not appreciated by the market. It can bring us to areas that are not so obvious in the moment. The thing is, as Max mentioned, those changes are happening more and more frequently. Industries are being transformed by technology, supply chains are being rebuilt, the market is broadening, so this is a great time to be active, to be able to change with the market as industries transform, to be be able pick both opportunities on the long and short side as the number of winners and losers seem to increase at a fast velocity these days, and to go global because the opportunity set is  increasingly across borders. That is really the sort of environment we've built this fund for.

[00:16:42] Hannah Klein: Excellent. Well, I'm wishing you both many more hidden gems and the journey has just begun with this public fund. Thank you so much for joining me in the studio today. It's been great to have you. And thank you all for watching. At Fidelity Canada we're releasing new content daily so check out The Upside or Fidelity Connects anywhere you listen to your podcasts. You can get an exclusive first look at Upside shows as a streamed webcast where you can sharpen your understanding as an investor and hear from some of Canada's best stock pickers and leading financial experts. Never miss a show by heading to fidelity.ca to sign up for future webcasts or The Upside newsletter. Thanks for watching today and I hope you'll join us again soon. I'm Hannah Klein.

[00:17:38] Kyle Cheropita: Thanks for listening to, or watching, Fidelity Canada's The Upside podcast. Subscribe on your podcast platform of choice so you don't miss an episode. If you like what you're hearing please leave a review or a 5-star rating. Fidelity mutual funds and ETFs are available by working with a financial advisor or through an online brokerage account. Visit fidelity.ca/howtobuy for more information. While on fidelity.ca you can also find more information on future live webcasts. don't forget to follow Fidelity Canada on LinkedIn, YouTube, Instagram, or X.

[00:18:07] We'll wrap things up today with a quick disclaimer. The views and opinions expressed on this podcast are those of the participants and do not necessarily reflect those of Fidelity Investments Canada ULC or its affiliates. This podcast is for informational purposes only and should not be construed as investment, tax, or legal advice. It is not an offer to sell or buy, or an endorsement, recommendation or sponsorship of any entity or security cited. Read a fund's prospectus before investing. Funds are not guaranteed. Their values change frequently and past performance may not be repeated. Fees, expenses, and commissions are all associated with fund investments. Thanks for tuning in. We'll see you next time.