M&G Emerging Markets Bond

This fund has the flexibility to invest across the whole emerging market bond spectrum. It can invest in both government and corporate bonds, denominated in local currencies or in the US dollar ('hard' currency). The manager uses her vast skill set in this asset class to analyse the macroeconomic environment, and individual companies, to pick what she believes to be the best mix of bonds for this portfolio.

Our opinion

M&G is one of the industry leaders in fixed income. The manager of the M&G Emerging Markets Bond fund, Claudia Calich, is extremely knowledgeable about this very complex asset class and her track record speaks for itself. The strategy is very flexible, meaning she can find the best opportunities available on both an income and capital growth basis. The fund may be suitable for investors who want exposure to emerging market bonds, as well as those who want a professional to decide the underlying asset allocation for them.

Fund manager

Claudia Calich has two degrees: a BA in economics from Susquehanna and a Masters in International Economics from the International University of Japan. Her work experience includes roles at Fuji Bank, Reuters and Standard & Poor's. Prior to joining M&G in October 2013, she was a manager at Invesco, based in New York, where she ran the Emerging Market Bond fund as well as some institutional accounts. She took over the management of the M&G Emerging Markets Bond fund in December 2013.

Careful and thorough credit research, with a focus on fundamentals, risks and valuations, is key to investing successfully in the emerging debt markets.

Claudia CalichFund manager

Investment process

Claudia and her deputy manager, Charles De Quinsonas, begin by looking at the macroeconomic environment. This includes the analysis of growth, politics, central bank policies, commodity prices and inflation. Their views on these elements will dictate how much risk they want to take at any given point and whether they prefer ‘hard’ or local currency denominations. The asset allocation within the M&G Emerging Markets Bond fund is very dynamic. The managers will then look at individual countries and, if they like a country, they will look at both the government and corporate bonds on offer. They will work closely with their dealing team to ensure they get the best price and can easily trade the holdings if needed.

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.

With this fund, Claudia and the team of credit analysts at M&G incorporate ESG factors into the fundamental analysis of their bond universe. The primary aim of this work is to identify potential downside risks. This is primarily around governance factors such as management structures and leverage levels, but also includes social factors such as corruption or political interference, and environmental factors which could lead to fines or regulation.

They use a proprietary, firm-wide system for scoring ESG, and are supported by the expertise of the wider ESG team. This is not only helpful with thought leadership, but also useful for monitoring and engaging 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

In addition to the individual stock analysis carried out by the investment team, M&G's dedicated risk team analyse each holding before it is included in the portfolio. The team carries out a variety of stress tests on factors such as interest rate changes, credit ratings and liquidity. It will also look at any correlations between existing holdings and a variance of currencies. After this, the portfolio has a daily risk monitoring process. The M&G Emerging Markets Bond fund will also be subject to interest rate, credit and currency risks.

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