Fidelity® Capital and Income Fund

Class No Load (FAGIX)
Scorecard
5 / 5 Stars
Lipper
5 4 1 5 5
Zacks Investment Research
1 (Strong Buy)
Standard & Poor's
4 / 5 Stars
TheStreet.com
D+ (Sell)

#7 in High Yield Bond

U.S. News evaluated 179 High Yield Bond Funds. Our list highlights the top-rated funds for long-term investors based on the ratings of leading fund industry researchers.

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Performance

The fund has returned 15.24 percent over the past year, 8.61 percent over the past three years, 15.51 percent over the past five years, and 9.82 percent over the past decade.

Trailing Returns Updated 06.30.2014
Year to date 7.3%
1 Year 15.2%
3 Years (Annualized) 8.6%
5 Years (Annualized) 15.5%
10 Years (Annualized) 9.8%

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Summary

The Fidelity Capital & Income Fund is one of the more volatile no-load, high-yield bond funds Fidelity offers.

As of July 03, 2014, the fund has assets totaling $10.76 billion. About 75 percent of its portfolio consists of high-yield bonds from domestic and foreign issuers; the remainder of the portfolio consists of bank loans and common and preferred stocks of domestic and foreign issuers. The fund seeks to provide income and capital growth.

The fund struggled more than other high-yield bond funds in 2008 because of its more volatile, lower-quality bond holdings. As a result, manager Mark Notkin stocked up on cash in late 2008 and was cautious with his purchases. This cash was available in early 2009 when bonds were very cheap. As the market improved throughout 2009, so did the fund’s high-yield bond returns. Most of the fund’s bond holdings are in corporate bonds. The fund focuses on B-rated bonds and has about 20 percent of its assets in bonds rated below B (as of the end of the first quarter). The fund’s performance in 2009 was aided by strong stock selection in the technology, metals and mining, and chemicals industries. The fund has returned 15.24 percent over the past year and 8.61 percent over the past three years.

Since its 1977 inception, the fund has undergone name changes to describe its high yield and risk performance, from Aggressive Income to High Income in 1981 and then to Capital & Income in 1991. According to Morningstar analyst Miriam Sjoblom, investors should be prepared for bumps in the future now that the extreme bargains of late 2008 and early 2009 are gone. "Notkin has begun to trim the fund's exposure to the lowest-quality issues in recent months," Sjoblom says. "But the portfolio still has claws." The fund has returned 15.51 percent over the past five years and 9.82 percent over the past decade.

Investment Strategy

The fund invests in stocks and bonds, including defaulted securities, but focuses on riskier, lower-quality bonds. The fund may invest in companies that are in troubled financial conditions, which may involve bankruptcies, reorganizations, or financial restructurings. The fund primarily focuses on bonds rated B, CCC, and lower and in nonrated bonds. The fund’s stock holdings can make up close to 20 percent of its total assets, according to Morningstar. The fund can also own bank loans.

Role in Portfolio

Morningstar calls the fund a supporting player in an investment portfolio.

Management

Mark Notkin has managed the fund since July 2003 and has worked at Fidelity since 1994 as a high-yield analyst and manager of Fidelity’s variable-annuity high-income product. He is supported by a large team of analysts and research assistants from Fidelity.

Fees

Fidelity® Capital and Income Fund has an expense ratio of 0.71 percent.

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Risk

The fund is one the riskiest bond offerings from Fidelity because its portfolio focuses on lower-quality bonds. Bonds that are less than investment-grade quality involve great risk of default or price change because of changes in the issuer’s credit quality. These lower-quality bonds are more volatile and can be difficult to resell.

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Fund Opinions

The fund's Value Line Overall Rank, a measure of risk-adjusted performance and relative growth in fund returns, is 2 on a scale of 1 to 5, with 1 being the best and 5 the worst.

Value Line 2014-06-11

The fund's Value Line Growth Persistence rank, which awards funds that consistently outperform their broad universes, is 2 for one year, 2 for five years, and 1 for 10 years. Scores are on a 1 to 5 scale, with 1 being the best and 5 the worst.

Value Line 2014-06-11

The fund's Value Line Risk Rank, a measure of volatility, is 5 on a scale of 1 to 5, with 1 being the least volatile and 5 the most.

Value Line 2014-06-11

In the annual Lipper/Barron’s Fund Families Survey for 2010, Fidelity Funds ranks 33rd out of 57 fund families surveyed.

Lipper

Morningstar gives this fund a stewardship rating of C on a scale of A to F, saying, “This fund has some good things going for it on the stewardship front, including moderate fees and a generally attractive culture. However, other factors, including an insufficiently independent board and poor manager ownership, keep its overall grade from being higher.”

Morningstar 2011-04-13

In the annual Lipper/Barron’s Fund Families Survey for 2010, Fidelity Funds ranks 33rd out of 57 fund families surveyed.

Lipper

Morningstar gives this fund a stewardship rating of C on a scale of A to F, saying, “This fund has some good things going for it on the stewardship front, including moderate fees and a generally attractive culture. However, other factors, including an insufficiently independent board and poor manager ownership, keep its overall grade from being higher.”

Morningstar 2011-04-13