The Fidelity Capital and Income Fund (FAGIX) – Rating Report

Symbol: FAGIXThe Fidelity Capital and Income Fund
Category: High Yield Fund
Style: Active
LB Rating: ***** 5 Stars
Last Updated: 9/13/12

Useful Links:

How to choose a bond fund with LB Ratings
High Yield Bond Funds Explained
Active vs. Passive Funds 
Bond Mutual Fund Fees



Fidelity Capital and Income Fund Overview

Summary: The Fidelity Capital and Income Fund (FAGIX) is a great high yield bond fund, but you cannot be averse to volatility.

Commentary:  If you looked up the definition of actively managed bond fund, it may have a picture of the fund’s manager Matt Notkin next to it.  Passively managed high yield funds like HYG and JNK, invest only in the most liquid high yield bonds.  The Fidelity Capital and Income Fund is on the opposite end of the spectrum.  Not only does the the fund Invest in defaulted debt, it even invests a small portion of its portfolio in stocks.

Over the last 10 years, Notkin’s investment decisions have paid off handsomely for the fund and its investors.  According to Morningstar, $10,000 invested in the fund in 2002 would be worth $31,883 today.  That compares to $22,378 for the average high yield bond fund.


Fidelity Capital and Income Fund Rating Criteria

Short-Term Performance: Good Over the last 12 months, the Fidelity Capital and Income fund underperformed the average high yield bond fund by 1.23%.  However year to date the fund is up 12.15%.  That compares to 9.77% for the average high yield fund.  Over the last 3 years the fund has outperformed the average high yield bond fund by 1% per year on average.

Long-Term Performance: Excellent The fund has outperformed its competitors over the last 5 and 10 year time frames.  Performance has been especially stellar over the last 10 years, with an average annual return of 12.19%.  That compares to a category average of 8.71% during that same time period.

Returns Relative to Risk: Good The credit risk of the bonds the Fidelity Capital and Income Fund invests is high, even for the high yield bond fund category.  However, with high yield it is all about the return that you are getting for the risk.  While it has sometimes been a rocky ride, historically the fund’s investors have been handsomely rewarded for the extra risk it takes.  As long as Matt Notkin stays at the helm we don’t anticipate that changing anytime soon.

Fees: Good. No Sales load and .77% yearly expense ratio.  Make sure you are buying the FAGIX, as there are other share classes of this fund that have a load fee.  You can learn more about mutual fund fees here.

Manager Tenure: Excellent.  Portfolio Manager Matt Notkin has managed the Fidelity Capital and Income fund for the last 10 years.

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