The superelasticity of iron-based shape memory alloys is manly determined by microstructural features like size and morphology of precipitates, crystal orientation, grain boundaries, or texture. The interaction of martensite variants or the formation of dislocations pinning the austenite/martensite interface are known to result in a functional degradation of the superelasticity. A Fe-Ni-Co-Al-Ti-B polycrystal with a strong 〈001〉 texture was studied under tensile loading in situ in a scanning electron microscope in combination with acoustic emission technique (AE), electron channelling contrast imaging (ECCI) and ex situ transmission electron microscopy (TEM) to shed some light on the understanding of functional degradation mechanisms. The acoustic emission data showed a decrease in intensity with increasing number of deformation cycles and were interpreted using the information from the in situ observations. In addition, the acoustic emission signals revealed an asymmetry of the forward and the reverse stress-induced martensitic phase transformation, which is related to the formation of dislocations. The pinning of the martensite interfaces by dislocations leads to a reduction in the packet density of the reverse transforming martensite, which results in a lower amplitude of the AE signals indicating the functional degradation.