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M&G Optimal Income

Elite Rated by FundCalibre

M&G is perhaps the biggest name in the UK fixed income space and this is its flagship offering. This ‘go-anywhere’ fund has a flexible mandate, which enables the manager to shift the interest rate exposure and to invest across the credit spectrum. The fund can, and often does, invest in equities and also derivatives.

Company Description

Founded in 1919, M&G Investments employs more than 1,500 people worldwide. The company, owned by Prudential plc, which is listed on the London Stock Exchange, focuses primarily on fixed interest and equities, but also invests in multi-asset and real estate. Its fund managers have an average tenure of 11 years, although many have been with the company for more than 20 years. Managers are given freedom to implement their own style on funds.

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Fund Manager

Richard Woolnough joined M&G in January 2004 and is also manager of Elite Rated M&G Corporate Bond and M&G Strategic Corporate Bond funds. Richard began his career at Lloyds Merchant Bank in 1985. In 1995, he became a fund manager at Old Mutual. Richard graduated from the London School of Economics with a BSc in Economics.

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With this flexible bond fund, I can invest across all of the fixed interest asset classes, allowing me to express my views on the direction of interest rates and the relative attractiveness of government and corporate bonds without constraints.

Richard Woolnough - Fund Manager

The Investment Process

Richard forms a macroeconomic overview of the fund, based on his assessment of the likely direction of growth, inflation and interest rates within different economies. These views, along with bond-specific factors, inform his opinion regarding where the relative value lies among the various fixed interest asset classes. When investing in a particular company, Richard examines its capital structure to choose the bond that best suits his requirements. At times, a company’s equity can appear cheap compared with its debt. Under those circumstances, Richard may buy the equity for the fund.

Risk

As the fund can invest in equities, it will be more risky than many of its peers. However, managing risk is integral to the investment approach and the fund is subject to investment guidelines and limits. A separate risk team provides ongoing analysis to assess the fund’s behaviour in various market scenarios.

Our Opinion

Few fixed interest managers can demonstrate that they can add value through interest rate exposure management, asset allocation and stock selection. Richard Woolnough is one of those few. An important caveat is the size of this fund and therefore its potential for liquidity concerns, but M&G is acutely aware of this and are closely managing the situation.

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©2014 FundCalibre Limited. All Rights Reserved. The information, data, analyses, and opinions contained herein (1) include the proprietary information of FundCalibre, (2) may not be copied or redistributed without prior permission, (3) do not constitute investment advice offered by FundCalibre, (4) are provided solely for informational purposes and therefore are not an offer to buy or sell a fund, and (5) are not warranted to be correct, complete, or accurate. FundCalibre shall not be responsible for any trading decisions, damages, or other losses resulting from, or related to, this information, data, analyses, or opinions or their use. The Elite Fund rating is subjective in nature and reflects FundCalibre’s current expectations of future events/behaviour as they relate to a particular fund. Because such events/behaviour may turn out to be different than expected, FundCalibre does not ,guarantee that a fund will perform in line with its FundCalibre benchmark. Likewise, the Elite Fund rating should not be seen as any sort of guarantee or assessment of the creditworthiness of a fund or of its underlying securities and should not be used as the sole basis for making any investment decision. FundCalibre disclaims any responsibility for trading decisions, damages or other losses resulting from any use of the Elite Fund rating.