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Investing in Fidelity Floating Rate High Income Fund

Fidelity Floating Rate High Income Fund (FFRHX) seeks to provide a high level of current income by investing in floating rate bank loans—also known as leveraged loans—which are issued by non-investment grade high yield companies.

Key features of this fund

  • Primarily invests in floating rate loans, which are often lower-quality debt securities (rated BB and below), and other floating rate debt securities
  • Invests in troubled companies or those in uncertain financial condition or with high levels of debt or leverage
  • Is not a cash equivalent or obligation of a bank
  • May not be appropriate for investing horizons of less than two years

Floating rate bank loans have interest rates that reset frequently. The interest rate on these securities is set as a fixed amount above a standard rate such as the London Interbank Offered Rate (LIBOR), which is a widely used benchmark for short-term lending among banks. Every few months, the interest rates on floating rate loans reset higher, or lower, to reflect changes in the benchmark. This characteristic can potentially make the securities less subject to interest rate risk than longer-term investment-grade or high yield bonds with fixed interest rates.

Like high yield bonds, high yield floating rate securities entail greater risk of loss than their investment-grade counterparts. However, since loans are senior to bonds on the balance sheet of their issuer, in the event of bankruptcy, loan-holders are repaid before bond-holders.

Things to keep in mind

The fund primarily invests in floating rate loans that are often lower-quality debt securities (rated BB and below) and thus, are risker than their investment-grade counterparts. In addition, the fund invests in companies in troubled or uncertain financial condition. While this results in a potential for high yields, there is an increased risk of default or price fluctuations due to changes in the credit quality of the issuer.

Furthermore, investments in foreign securities, especially those in emerging markets, involve additional risk such as increased political and economic risks as well as exposure to currency fluctuations.

Each of the fund's investment categories may experience periods of volatile returns, and it is possible for all investment categories to decline at the same time.


Learn more

  • Bond ratings

    Just as individuals have their own credit rating issued by credit bureaus, bond issuers generally are evaluated by their own set of ratings agencies to assess their creditworthiness.

    Learn more about how bond ratings work.

Before investing, consider the funds' investment objectives, risks, charges, and expenses. Contact Fidelity for a prospectus or, if available, a summary prospectus containing this information.  Read it carefully.
Lower-quality bonds can be more volatile and have greater risk of default than higher-quality bonds.
Floating rate loans may not be fully collateralized and therefore may decline significantly in value.
Fixed income investments entail interest rate risk (as interest rates rise bond prices usually fall), the risk of issuer default, issuer credit risk and inflation risk. Foreign securities are subject to interest rate, currency exchange rate, economic, and political risks.