Fidelity Investments Biotech & Healthcare Fund

Investing is as much an art as it is a science. While we use sophisticated analytical tools to evaluate opportunity sets, the ultimate investment decision requires judgment, experience, and the ability to synthesize qualitative and quantitative inputs into a coherent view of value. Our portfolio managers bring an average of over 18 years of investment experience, having navigated multiple market cycles including the global financial crisis, the European debt crisis, and the COVID-19 pandemic.

Our research process begins with a thorough understanding of the industry landscape. We map the competitive dynamics, identify structural tailwinds and headwinds, and build detailed financial models that project multiple scenarios under different economic conditions. Only companies that pass our stringent quality screening — evaluating factors such as return on invested capital, free cash flow generation, balance sheet strength, and management track record — are eligible for inclusion in the portfolio.

The fund employs a bottom-up investment approach, focusing on quality companies in the Sectoral - Healthcare space. Portfolio construction is driven by in-depth fundamental research, earnings momentum, and macroeconomic analysis. The management team leverages Fidelity Investments's global research platform to identify high-conviction opportunities while maintaining a disciplined risk management framework.

Stewardship is not a compliance exercise for us — it is a fundamental expression of our fiduciary duty to clients. We believe that as significant shareholders in the companies we invest in, we have both the right and the responsibility to engage actively with management on issues that are material to long-term value creation.

Our stewardship programme is organised around three pillars: monitoring and assessment, engagement, and voting. Our monitoring framework tracks a comprehensive set of corporate governance and sustainability indicators for every holding, flagging material changes for immediate review. Our engagement programme involves direct dialogue with boards and senior management, focusing on the issues where we have the highest conviction that change will create value. Our voting programme applies a rigorous set of guidelines that prioritise shareholder rights, board accountability, and executive pay alignment.

Looking ahead, we remain constructively positioned despite the complex macro environment. Global economic growth, while moderating, continues to be supported by resilient consumer spending in developed markets and accelerating investment in emerging markets infrastructure. Central bank policy, having pivoted toward easing after the aggressive tightening cycle of 2022–2024, is now providing a more supportive backdrop for risk assets.

Our near-term concern centres on the trajectory of corporate earnings. Consensus estimates, in our view, may be pricing in an overly optimistic scenario for margin recovery. Supply-side pressures in certain sectors — particularly semiconductors, pharmaceuticals, and clean energy — have subsided more slowly than anticipated, and the pass-through of higher input costs to consumers is showing early signs of fatigue. We have positioned the portfolio defensively in these areas while maintaining full exposure to sectors where the earnings visibility is highest.

With a presence in 15 cities across 4 continents, we have built a truly global investment platform while retaining the agility and client focus of a specialist firm. Our local investment teams have deep expertise in their regional markets, while our global framework ensures consistency of process, risk management, and client service standards.

The firm manages capital across the full spectrum of asset classes, from liquid equity and fixed income strategies to illiquid alternatives including private equity, private credit, real estate, and infrastructure. This breadth of capability allows us to construct genuinely diversified solutions for our institutional and ultra-high-net-worth clients.

What makes our team truly distinctive is not just individual talent, but our collaborative culture. We have deliberately constructed an environment where diverse perspectives are actively sought and robust debate is encouraged at every level of the organisation. A junior analyst is expected to challenge the views of a senior portfolio manager with the same intellectual rigour that a seasoned professional would apply — and the portfolio manager is expected to take that challenge seriously.

This culture of intellectual honesty extends to our post-mortems. When an investment thesis proves incorrect, we conduct a thorough analysis of where our thinking went wrong — not to assign blame, but to identify systemic biases or process failures that can be corrected. These learnings are documented in our institutional memory database and shared across the organisation.