Sarah Bush: This week's Medalist of the Week is Fidelity High Income. Unlike many high-yield funds which focus either on more aggressive parts of the high-yield market or more conservative, this one takes a middle-of-the-road approach.
Manager Fred Hoff is focused on identifying companies with improving fundamentals over a two- to three-year period and mispriced. And as a result he tends to focus on the single B rated tranches of the market which are in the middle of that high-yield risk spectrum.
Now that focus doesn’t always pay off in the highest returns in the risk-taking markets that we've seen for most of the periods since the end of the credit crisis, but it has resulted in a really strong long-term record for this fund.
What we like about this fund moreover is Fred Hoff is an experienced manager with a lot of experience both as a manager and as an analyst, and he's backed by a deep team of analysts at Fidelity.
He focuses both on that company research, trying to figure out which companies have strong management teams and also trying to identify parts of the capital structures that are particularly attractive. Part of this fund's long-term record and the strength of its long-term record comes from his ability to navigate the difficult 2008-09 time period particularly well.
Now high yield is currently a part of the market where, like everything else, valuations are pretty tight, absolute yields are low, and spreads are tight, so investors should temper their expectations and be prepared for volatility.
All in all, this fund's strong management team, good long-term record, and sensible process merit Morningstar Analyst Rating of Gold.