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.
Company description
Founded in 1931, M&G Investments employs more than 2,000 people worldwide, including 350 investment specialists. The company was formerly owned by Prudential plc, but de-merged in 2019 to become listed on the London Stock Exchange. It 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
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.
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 nor 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. All performance data, as well as fund size, OCF, AMC, annual income (historic), share price discount or premium, is sourced directly from FE Analytics, and will change periodically.