The business unit’s three investment categories are diversifying sources of return in which portfolio managers will invest in market-neutral equity, merger arbitrage, fallen angels and alternative risk premium, among other investments; active allocation, including actively managed global tactical asset allocation; and protective strategies, which will use derivative-based strategies to provide downside protection from inflation risk and declines in equities, Mr. Zlotnikov said. He stressed that investment diversification has long been part of Fidelity’s institutional investment offerings, including in target-date funds, OCIO, variable annuity and insurance strategies, but as one example, active allocation “only now is considered a stand-alone product.”
Fidelity Diversifying Solutions will offer its dedicated alternatives in three ways, Mr. Zlotnikov said.
In addition to 40-Act mutual funds, the unit will offer limited partnerships with longer-dated investments and multiasset or stand-alone strategies for institutional investors, including customized strategies.
Mr. Zlotnikov said Fidelity will hire subadvisers to manage diversifying strategies investment offerings “when necessary if we don’t have internal expertise.”
He added that even though Fidelity’s diversifying unit has yet to offer its new strategies to investors, he is seeing interest in the alternative funds from endowments, foundations and defined benefit plans.
As of March 31, Fidelity managed a total of $4.3 trillion in discretionary assets and $11.3 trillion in assets under advisement.
Institutional assets under management totaled $2.03 trillion as of Dec. 31, the most recent data available.