M&G Episode Income is a multi asset fund that invests directly in individual stocks and bonds, while property exposure is gained by investing in property funds. The name “Episode” refers to those periods of time when investors' emotions cause them to act irrationally. The manager uses behavioural finance to find pockets of value and invest against the herd, rather than following it.
Our opinion
The episode multi-manager team has two strong differentiating attributes: it constantly looks for value created by investor irrationality and then takes positions that reflect those views. Investing directly into stocks and bonds gives greater liquidity within the fund, as well as keeping costs down. The M&G Episode Income fund is particularly pertinent at the moment when the search for income has led to many investors chasing the same ideas.
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
Steven Andrew joined M&G in 2005 as a member of the portfolio strategy and risk team. He is now a key member of the episode multi-manager team including the M&G Episode Income fund, which he has run since November 2010. Before joining M&G, he worked at F&C Asset Management, Merrill Lynch and the Bank of England. Steven graduated from the University of London in 1997 with a degree in Financial Economics. He was joined by co-manager Stefano Amato in December 2022. Maria Municchi was appointed deputy manager in 2017.
Our edge is in understanding the emotional sources of volatility .
Steven AndrewFund manager
Investment process
Attractive valuations are always the starting point with the M&G Episode Income fund. Steven assesses a wide range of assets around the world and then seeks to identify what is driving something to be under-priced: there could be a valid reason, or it could be due to human behavioural factors. If it is the latter, by identifying market 'episodes', the team is able to buy and sell holdings that reflect its views at advantageous prices.
ESG
ESG - Integrated
M&G has clear and defined categories for the ESG focuses of its fund range. The Episode Income fund financially integrates material ESG data into its risk management and decision-making process. There are some basic company-wide exclusions which apply to the fund, such as cluster munitions and anti-personnel mines. ESG analysis is performed by a third party and imported into the process. The team will always engage with management to better understand a company and advise on diverse matters, including ESG issues, but will not necessarily exercise its shareholder right to vote.
Risk
Risk is primarily controlled through simple diversification. This diversification also allows the manager to produce a stable level of income. No position will account for more than 0.75% of the portfolio, which means individual holding risk is low.
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