Marion Le Morhedec, Global Fixed Income CIO
How integrated research, portfolio management and trading can help uncover overlooked risks and opportunities, turning insight into action and supporting more consistent alpha generation.
Research quality is often presented as a source of competitive advantage in asset management. Yet approaches vary widely, and there is often limited visibility on how research insights shape investment decisions. If the purpose of research is to generate alpha, it is not just the quality of that research that matters, but also how it is applied in practice to deliver positive and consistent outcomes.
Shaping investment decisions with research insights
The best investment ideas are rarely the most obvious. Markets are efficient at pricing what is widely known, but less so at what is complex, under-analysed or obscured by noise and short-term sentiment. In this context, alpha can be created by identifying and exploiting inefficiencies through disciplined decisions: being underweight what is overvalued and overweight what is undervalued.
Identifying such mispricings requires a differentiated and more accurate view of fair value. That, in turn, depends on an informational edge derived from experience, access to the right information, robust modelling and a willingness to challenge consensus thinking. The objective is straightforward: to identify details the market is not fully pricing, while retaining sufficient context to understand how they could affect returns and risk, so that opportunities can be captured and risks avoided as they arise.
Ultimately, however, the credibility of any research edge depends on the outcomes it delivers. Insights must therefore be able to move from idea to action through an integrated process that connects analysts with portfolio managers and traders. Over decades, we have developed such a structure and used it successfully to translate research insights into measurable outcomes.
Trusting research to avoid major risks
This matters on both sides of the coin, as bottom-up analysis can be as valuable in avoiding losses as in generating returns. In September 2025, when sentiment around the technology sector was firmly positive, one of our credit analysts, Henry Skilling, initiated coverage of one of the sector's largest issuers with a clear recommendation: sell all non-short-dated holdings.
His assessment highlighted a risk the market appeared to discount: the company's long-term growth thesis masked the scale of capital expenditure required to fund cloud infrastructure. This, he believed, would put pressure on free cashflow for several years and require greater debt issuance than investors were anticipating. Its longer-dated bonds, he concluded, were particularly exposed.
In the weeks after the publication of his note, spreads widened. Rick Patel, one of our fixed income portfolio managers, had acted on the call and reduced exposure ahead of the move. "By not owning those longer-dated bonds, we avoided that loss in capital value," he noted. His decision was reinforced by discussions with colleagues across other asset classes. Collaboration with Ben Holton, the equity analyst covering the same company, helped refine both timing and conviction.
Capturing overlooked opportunities
Research is, of course, also intended to reveal opportunities, and these often arise where headline risk dominates. In January 2025, another of our analysts, Sahil Kapoor, assessed a planned bond issuance by an emerging-market telecoms company. The company faced the challenge of revenues being largely denominated in a volatile domestic currency, while debt was issued in US dollars. Its financial reporting was also complex.
>He nevertheless recommended participation. The rationale lay in details the market appeared to overlook: the company operated with low leverage, held around 80 per cent of its cash in US dollars and euros, and had an established track record of hedging currency exposure. Meetings with management confirmed there were no plans to loosen balance-sheet discipline. The complex reporting, meanwhile, reflected the application of IAS 29, an accounting standard for hyperinflationary economies. This required additional analysis but did not alter the underlying fundamentals.
Our analyst tested his assessment against other perspectives, sharing it with sovereign analysts and emerging-market portfolio managers to build conviction in the context of the broader backdrop. Company-level insight is strongest when tested against macroeconomic and portfolio-level perspectives, and when assumptions are challenged rather than reinforced. Conviction can be increased by understanding the top-down context in which a bottom-up investment is framed.
For James Durance, the portfolio manager who invested, the bonds went on to contribute handsomely to performance. This is not because the investment was without risk, but because the risks were well understood and viewed favourably in the context of price.
The context behind research implementation
Effective research rarely operates in isolation. When a portfolio manager decides to buy or sell an investment, the process does not begin and end with a research recommendation. Decisions are complemented by the work of specialist traders who track day-to-day market dynamics and assess the ability to translate conviction into executable decisions.
Our senior trader in emerging-market fixed income, Cristiana Gen, considers that the team's job is "to understand the technical details. How easy is an investment to trade in and out? What are the transaction costs? Who owns the bonds? Is there likely to be new supply or demand?" These insights help determine whether and how ideas are implemented.
In this respect, execution can itself be a source of alpha. In primary markets, traders work through our New Issue Process, combining relative-value analysis with views on how bonds are likely to trade post-issuance given prevailing conditions. In competitive markets, the strength of counterparty relationships and the ability to secure appropriate allocations can also materially influence outcomes.
In markets where the obvious is priced quickly, the real edge lies in identifying what has been overlooked and having the expertise to act on it. The difference between research that informs and research that delivers lies in connectivity. When fixed income and equity analysts, portfolio managers and traders operate as part of a shared, integrated process, insights are tested more rigorously, risks are identified earlier and stronger conviction can be built. It is this constant dialogue that allows research to move beyond observation to implementation.
Important information
This is for investment professionals only and should not be relied upon by private investors. Investors should note that the views expressed may no longer be current and may have already been acted upon. Past performance does not predict future returns. Returns may increase or decrease as a result of currency fluctuations. The value of investments and the income from them can go down as well as up so you may get back less than you invest. The value of investments in overseas markets can be affected by changes in currency exchange rates. Investments in emerging markets can be more volatile than other more developed markets. Reference to specific securities should not be construed as a recommendation to buy or sell these securities and is included for the purposes of illustration only. The Key Investor Information Document (KIID) is available in English and can be obtained from our website at www.fidelityinternational.com. The Prospectus may also be obtained from Fidelity. Issued by FIL Pensions Management. Authorised and regulated by the Financial Conduct Authority. GCT260375EUR
