Fidelity Advisor Floating Rate Fund Commentary – Q4 2021
Thesis
FIQSX (yielding 3.26%) is a large, floating rate fund that has strong historical returns and a tenured management team. By investing purely in senior bank loans, FIQSX further increases our potential upside gain, reduces our duration-risk, and decreases our interest rate risk. We like that the fund utilizes a bottom-up investment process through proprietary framework analysis, avoids high-yield corporate bonds, and allocates to relatively higher-rated securities within the floating rate security space.
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Overview
In the fourth quarter of 2021, FIQSX performed roughly in line with the benchmark (S&P/LSTA Leveraged Loan Index). In general, loans saw stronger performance than high-yield corporate bonds, IG corporate credit, and other broad-based IG markets. Issuance reached an all-time high in October which was matched by high demand from CLOs and retail funds. November then saw a slight drop, but a strong rebound in December largely due to Omicron concerns. Headlines around rising interest rates also sparked demand for floating rate securities which helped drive performance.
Q4 2021 Summary
- FIQSX returned 0.79%, while the Leveraged Loan Index returned 0.77%
- Quarter-end effective duration for FIQSX was 0.16 and 0.12 for the Leveraged Loan Index
- Largest contributors
- Murray Energy (coal mining), Rivian Automotive (EV manufacturer), not owning Envision Healthcare (health-care service provider)
- Largest detractors
- Out-of-benchmark holding in TNT Crane & Rigging (crane service provider), Sinclair Broadcast Group (TV station operator), Rodan & Fields (skin case company)
2021 Performance Comparison
[Category Mutual Fund Commentary]
Micah Weinstein
Research Analyst
Direct: 617.226.0032
Fax: 617.523.8118
Crestwood Advisors
One Liberty Square
Suite 500
Boston, MA 02109