The reputation Fidelity has means the team has great access to the senior management teams of the companies in which it is looking to invest. All in all, I can use these resources to find high quality companies that engender the characteristics I am looking for.
If we look at the fund today, there is a high level of weighting in defensive companies, such as consumer staples, branded goods producers and utilities.
At the top end of the fund, we have 7 per cent each in GlaxoSmithKline and AstraZeneca, with around 20 per cent of the fund in total dedicated to pharmaceuticals. Consumer goods, such as tobacco companies and the likes of Unilever makes up another 15 per cent, while utilities totals around 12 per cent.
I have some mid-cap exposure, although there is a need to be careful and mindful with smaller companies.
Overall, the structure of the fund and the types of companies it invests in tend to remain stable, with a low turnover of around 20 per cent. However, with the team casting a critical eye on the management of each of its holdings, I will sell out of positions if I thinks the investment case has fundamentally changed.
It is very important to us what management does to a company, what policies it has for running it and the decisions it makes about the future.
For example, when Vodafone sold its joint venture with Verizon it took out one of its main cash generative assets, which meant the support to its dividend had also largely gone. We took the decision to sell as a result of that.
The issue is, we have to be aware of potential changes to the way in which a company is run as early as possible as, if we decide to sell, we will need to replace the income from other sources as quickly as we can. We have always made it clear to investors that we endeavour to increase the dividend from this fund year-on-year; the growth of income is a key tenet of the MoneyBuilder Dividend Fund. That means, however, if a big holding changes its policy, we have to find the income elsewhere.
Another strategy the manager employs is not to be too hasty to sell out of a position if the dividend falls as the share price rises, particularly if its fundamental characteristics are still strong and there is the potential for good levels of growth in the future.
