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M&G Corporate Bond Fund
The M&G Corporate Bond is a straight-forward corporate bond fund that invests primarily in sterling-denominated investment grade debt. However, its highly-experienced manager, Richard Woolnough, can use up to 20% of the portfolio to invest in higher-yielding corporate bonds, government debt or asset-backed debt. M&G has one of Europe’s largest teams of credit analysts and therefore has a key competitive advantage in credit research.
Our opinion
The M&G Corporate Bond fund is run by a highly experienced manager and is often used as a core holding for corporate bond exposure. The vast depth of the fixed interest and dealing teams at M&G gives investors reassurance in terms of idea generation, risk controls and liquidity.
Company description
Founded in 1931, M&G Investments employs more than 2,000 people worldwide, including 350 investment specialists. 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. Many of its fund managers have been with the company for more than 20 years. Managers are given freedom to implement their own style on funds.
Fund manager
Richard Woolnough joined M&G in January 2004 and manages the M and G Corporate Bond fund. He is also manager of Elite Rated M&G Optimal Income 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.
The M&G Corporate Bond Fund is designed to be a steady, reliable corporate bond fund that can form a core part of clients’ portfolios.
Richard WoolnoughFund manager
Investment process
Richard's investment approach is very much ‘top-down’, meaning he will actively manage the portfolio according to his outlook for economic growth, inflation and interest rates. M&G’s in-house team of credit analysts provides analysis of the corporate bond market to help shape individual bond selection for the portfolio. The fund has a flexible mandate, which allows Richard greater investment freedom and enables him to take a high-conviction approach when selecting credits for the portfolio. However, it is generally less concentrated than its sister fund, M&G Strategic Corporate Bond, which has fewer holdings.
ESG
ESG - Integrated
M&G has clear and defined categories for the ESG focus of its fund range. The explicit ESG range includes impact, sustainable and plus features. Other funds have different levels of integration, with a focus on investment stewardship. There are also some company-wide exclusions for all funds, such as cluster munitions.
This particular fund uses ESG analysis to protect from potential downside risks. This work is carried out by the in-house credit analyst team, which identifies the risks and potential impact, and determines whether this diminishes the investment opportunity.
As the fund manager, Richard can choose whether he wishes to take these risks. As well as identifying risks, understanding ESG can also be a source of returns, whereby a firm with a product or service that is a solution to ESG issues may have improved fundamentals as it capitalises on this opportunity.
The team uses a proprietary, firm-wide system, for scoring ESG. This not only helps with thought leadership, but also supports monitoring and engagement after investment. Debtholders typically have less direct influence than shareholders over a corporate’s strategy, but engaging helps better understand, manage, and potentially reduce ESG risks.
Risk
M&G Corporate Bond fund is very well diversified across hundreds of different positions. The fund has historically had slightly greater interest risk than its more focused sister fund M&G Strategic Corporate bond. This has led to it being slightly more volatile in the past.* Due to its popularity, the strategy (including similar funds sold in Europe) has become quite large and this is something we will keep an eye on in the future.
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