In Ravenloft (specifically Van Richten's Guide to the Shadow Fey), it was stated that fey can physically change "species" over time, when their mentality changes. A sweet little flower faerie may, due to events, turn into a greenhag. I like that explanation enough that I use it in all of my games. A particularly sadistic, bloodthirst fey is likely to become a redcap, and a redcap who manages to lose their bloodthirstiness may become something else. I could even see going so far as to see a fey turn into a celestial or fiend (or vice versa), given unusual circumstances. But this is solely due to their innately magical, quasi-immortal nature and isn't applicable to mortal creatures.