Why Our Confidence in This Fidelity Fund Is Growing

Fidelity Advisor High Income Advantage’s FAHYX edge is the firm’s experienced managers and robust credit and equity research capabilities. This earned the strategy a People rating upgrade to High from Above Average in July 2024 and a Morningstar Medalist Rating upgrade to Bronze from Neutral for its M shares.

Mark Notkin, who has managed Fidelity Capital & Income FAGIX following a nearly identical approach since 2003, became this strategy’s lead manager in 2019, succeeding Harley Lank. Brian Chang, who Notkin has mentored since 2017, has worked on this strategy for about five years. Their partnership and collaboration instill confidence in the fund. The team executes a dynamic strategy that seeks to tap multiple complementary return sources such as syndicated bank loans and private credit. They also draw on Fidelity’s equity research for ideas in the portfolio’s stock sleeve, which often is one of the largest in the high-yield bond Morningstar Category.

The strategy’s research team remains robust. After a former analyst left for a different role at Fidelity, it hired a more experienced researcher to bring the team’s average industry experience to 12 years. The fund’s absolute and volatility-adjusted annualized performance, as measured by the Sharpe ratio, ranks among the category’s best over the past five, 10, and 15 years through June 2024.

Key Morningstar Metrics for Fidelity Advisor High Income Advantage

• Morningstar Medalist Rating: Bronze
• Process Pillar: Above Average
• People Pillar: High
• Parent Pillar: Above Average

A Consistent Philosophy

FPA New Income’s FPNIX defined goal sets it apart and helped upgrade its Process rating to High from Above Average and the Medalist Rating of its institutional shares to Silver from Bronze.

Manager Abhijeet Patwardhan took this strategy over in mid-2022 after a lengthy transition. Although the team is small, its emphasis on value and investing with substantial safety margins keeps the workload manageable. The fund’s objective shapes its process. It seeks returns of at least 100 basis points above the Consumer Price Index over five-year periods and wants to deliver positive returns over rolling 12-month periods. The team keeps at least 75% of the portfolio’s assets in bonds rated A or higher, including highly rated mortgage-backed securities, commercial mortgage-backed securities, and various types of asset-backed securities. The team conducts thorough issue research and stress-testing before purchasing anything.

The team maintains a shorter duration (a measure of interest-rate sensitivity) than its peers unless there are significant market yield shifts. Such a shift occurred in 2022 when the Federal Reserve hiked short-term rates, prompting Patwardhan to extend the fund’s duration in early 2022. By the end of March 2024, its duration stood at 3.1 years, the longest since 2001.

Key Morningstar Metrics for FPA New Income

• Morningstar Medalist Rating: Silver
• Process Pillar: High
• People Pillar: Above Average
• Parent Pillar: Above Average

Right Talents in Place

Increased conviction in Polar Capital Emerging Market Stars’ POLEX team drove a People Pillar upgrade to High from Above Average in July, which resulted in an overall Medalist Rating upgrade to Silver from Bronze for its institutional shares.

This team leans toward the stocks of countries it believes offer compelling long-term growth prospects. Manager Jorry Nøddekær has run this strategy through an Ireland-domiciled vehicle since June 2018. Comanager Naomi Waistell joined the effort in August 2020 to enhance the team’s depth. Both managers possess stock-specific knowledge and had strong track records in managing emerging-markets strategies before they joined Polar. An experienced five-person team supports Nøddekær and Waistell. Two team members joined Polar with Nøddekær, and recently, the team hired two more people to build expertise in key markets such as India and Latin America.

Key Morningstar Metrics for Polar Capital Emerging Market Stars

• Morningstar Medalist Rating: Silver
• Process Pillar: Above Average
• People Pillar: High
• Parent Pillar: Above Average