Mark Notkin, portfolio manager of the $12.8 billion Fidelity Capital & Income Fund, the best-performing high-yield fund in the past five years, says the rally in junk bonds is over. His fund has delivered an average of 9.9% a year and is up 14% this year.

Since the beginning of 2009 through September of this year, investors have withdrawn $129.9 billion from U.S. equity funds and placed $55.1 billion into U.S. high-yield funds, according to EPFR Global.

“I don’t see the value in the high-yield market. You are not being paid to take risk,” Notkin told Bloomberg. Thus, he is moving into higher-quality bonds. “The market is fairly valued, if not overvalued. Compared to high yield, equity is very cheap,” Notkin said.

“The pendulum has swung from high yield to equities,” agreed Margaret Patel, who runs both a bond and a stock fund for Wells Fargo.

In 2009, the Fidelity Capital & Income Fund had 35% of its assets in bonds rated CCC or below, compared to an average 21% exposure in other high-yield funds, according to Morningstar. That exposure boosted the fund’s return to 72% in 2009, compared to a return of 58% in the Merrill Lynch U.S. High Yield Master II Index.

As of Sept. 30, the Fidelity Capital & Income Fund had reduced its exposure to bonds rated CCC or below to 21%, compared to an average allocation of 17% among other high-yield funds.

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