Fidelity Floating Rate: Rising-rate play

This fund is a top choice for income investors concerned about an eventual rise in interest levels.

By TheStockAdvisors Apr 11, 2013 2:14PM
Money grow copyright Dynamic Graphics, Creatas Images, JupiterimagesBy Jim Lowell, Fidelity Investor

As the U.S. economy gathers strength across multiple industries, I'm recommending a trade that addresses the threat of inflation to longer-duration treasury-laden funds.

For both safety and yield in a "rising rate environment," my recommendation in our more growth-oriented portfolios is to add or increase our stake in Fidelity Floating Rate High Income (FFRHX).

We note that Christine McConnell is retiring after 25 years at Fidelity. Christine originally joined Fidelity in 1987 as a high-yield bond analyst. She has been lead manager of Floating Rate High Income since August 2000.

I am recommending a trade into Floating Rate High Income despite the fact that Christine is leaving. Her successor is well versed in Christine's style and approach to these types of securities.

Eric Mollenhauer has taken over Floating Rate High Income; he is a talented investment professional with 18 years of investment experience and extensive knowledge of the leverage loan market.

The similarities between the approaches of the two managers are extensive. Eric has worked alongside Christine on Fidelity's leveraged loan team for the past six years.

Like Christine, Eric's investment approach is also founded on rigorous, credit-intensive, bottom-up fundamental research. Eric also places great emphasis on visiting companies and meeting with their management regularly.

He looks to utilize these fundamental insights to determine when we have a differentiated view from the rest of the market, and leverage this to drive alpha for the portfolio.

As each in the past, Eric expects a fund's positioning to be driven primarily by individual loan selection. In sum: I think we're in good hands.

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