M&G Global Macro Bond Fund

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.

Fund manager

Jim Leaviss joined the M&G dividend fund 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 Global Macro Bond 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 of understanding, Jim will move on to choosing the bond markets he likes the most and create an overarching 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.

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, the internal credit team incorporates ESG analysis into its fundamental analysis work. The primary aim of this is to identify potential downside risks, though it may also identify opportunities from those firms on the right side of emerging ESG trends.

Jim looks at a variety of trades, both near term and over a longer period. As such, he may invest in the debt of companies with longer-term ESG issues, but which may have a short-term return opportunity. He will still want to understand all ESG risks for a holding, and the impact it could have on the business, though this may be deemed immaterial in the short-term. There is also engagement after investment, supported by the wider ESG team that will engage with company management to better understand, manage, and potentially reduce ESG risks.

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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