Fidelity SAI Convertible Arbitrage Fund (FSAWX)

Overview

The fund advisor operates by deploying a convertible arbitrage strategy, focusing on leveraging a mix of convertible securities which typically include debt securities or preferred stocks. These financial instruments are distinctive as they can be exchanged for, or automatically converted into, common stock. The primary methodology employed consists of acquiring these convertible securities while simultaneously hedging against the equity risk associated with them. This is chiefly achieved through the sale of short positions in the common stock into which the convertible securities could potentially be converted. It is important to note that the fund operates under a non-diversified status, signifying a focused investment approach that may involve heightened risk and potential for volatility in comparison to diversified funds.

Products and Services

• Convertible Arbitrage Strategy

This specialized investment approach involves the simultaneous purchase of convertible securities and the short selling of the corresponding common stock. The convertible securities portfolio may consist of various debt securities or preferred stocks that offer the potential for conversion into common stock. This strategy aims to exploit pricing inefficiencies between the convertible securities and the underlying common stock, attempting to generate profits while minimizing exposure to market movements.

• Exposure to Convertible Securities

Investors are provided with exposure to a portfolio of convertible securities. These instruments are an attractive option for those looking to diversify their investment with securities that combine the features of both debt and equity. Convertible securities typically offer a fixed income return similar to bonds, with the added option of converting into shares of common stock, providing potential for capital appreciation.

• Equity Risk Hedging

Understanding the inherent equity risk associated with holding convertible securities, the fund employs a hedging strategy designed to mitigate this risk. This is primarily accomplished through the selling of short positions in the common stock into which the convertible securities can be converted. Such a hedging strategy is pivotal in protecting the investment from adverse market movements that affect the equity segment of the convertible securities.