M&G Global Macro Bond is a ‘go-anywhere’ bond fund: manager Jim Leaviss can invest in any bond issued by governments and companies absolutely anywhere in the world. He can also invest in any currency. In deciding where to invest, Jim will use his considerable skill to take a view on macroeconomic conditions and combine this view with the stock-picking skill of his team to create a portfolio that should benefit from both long-term trends and short-term tactical investments.
Our opinion
Jim has a vast array of tools at his disposal for this fund and uses them all to great effect. From his own ability to read the macroeconomic environment, to his team’s stock-picking skills and full flexibility of the fund in terms of bonds, currencies and the use of derivatives, it is a formidable mix. Over the past twenty years managing this fund he has produced some excellent returns for investors.
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
Jim Leaviss joined M&G in 1997 after a five-year stint at the Bank of England and has more than 20 years experience in fixed interest markets. As well as being manager of the M&G Global Macro Bond fund since its launch in 1999, Jim also manages other funds for M&G and is the head of the company’s wholsesale fixed interest team, which consists of 20 individuals, 21 bond funds and £46 billion of assets under management.
Jim has recently been joined on the fund by deputy manager Eva Sun-Wai. Eva joined M&G in 2018 as part of the graduate scheme and has worked on a variety of research areas and funds. She has a degree in Economics from the University of Birmingham, has completed level 1 of the CFA and obtained the IMC qualification. Alongside this fund, she is the lead manager of the M&G Global Government bond fund.
Investment process
As the fund’s title suggests, the process starts with a look at the global macroeconomic picture to identify the things that are going to affect bond markets over the next few years. Jim will consider factors such as central bank regimes and the long-term inflation target. He will also look at the current point in the global economic cycle, and try to identify any source of thematic disruption, such as the impact of new technology on inflation, or the increasing rise in populist politics and what impact that too could have.
With this broad level understanding, Jim will move on to choosing the bond markets he likes the most and create an over arching asset-allocation. Not only does this identify the bond markets he prefers, but also which instrument is best to implement that choice. Jim will then look across M&G’s global bond team, picking the best ideas that fit with his longer-term macro views and shorter-term overlays. The goal is to find a range of bonds that are not correlated with each other.
Risk
Risk is a key input into the whole framework, with correlation the main consideration. Jim will use derivatives to help with reducing risk and will ‘neutralise’ positions to ensure that when he makes an investment, he takes specific risks, not unintentional ones. Investing in currencies add to risk. The fund is totally unconstrained on its broad asset allocation, but has some restrictions by issuer. Investment grade issuers are limited to 5%, with high yield issuers to 3%. Investment grade governments bonds have no restrictions.
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