Active vs. Passive investing: understanding the costs
The debate between active and passive investing has divided the investment world for years. Suppo...
M&G Strategic Corporate Bond
M&G Strategic Corporate Bond invests mainly in investment grade bonds, but up to 20% of the portfolio may also be held in high yield bonds, government debt, convertibles and preference stocks. It is the more flexible of two M&G corporate bond funds rated by FundCalibre.
Our opinion
We like this fund's flexible mandate and ability to move away from the benchmark at times when the opportunity to add extra value arises. This does make it higher conviction, and can add to the risk, but with an experienced manager and team at the helm we think they can achieve their aims. It makes for an interesting alternative in this sector.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 the freedom to implement their own style on funds.
Fund manager
Richard Woolnough joined M&G in 2004 and started managing this fund in 2006. He is also manager of Elite Rated M&G Optimal Income and M&G Corporate Bond. Having graduated from the London School of Economics with a BSc in Economics, Richard began his career at Lloyds Merchant Bank in 1985, before moving to Assicurazioni Generali (an Italian insurer) and then SG Warburg. In 1995 he became a fund manager at Old Mutual.
Ben Lord joined him as the co-manager in January 2020.
In this fund, I have more freedom to back my convictions. I take a focused approach with larger positions in an effort to enhance returns for investors.
Richard WoolnoughFund manager
Investment process
Richard's view on the economic outlook will determine the asset classes and sectors in which the portfolio is concentrated. M&G’s in-house credit team then provide in-depth analysis of the corporate bond markets, which complements the fund manager’s views. As a very large investor in the corporate bond world, M&G managers and analysts have no problems getting access to a company. Often this access will involve an on-site due-diligence visit to comprehend the workings of a company, its staff and other assets. They will generally not invest in a credit unless they have spoken to the issuing company beforehand. M&G Strategic Corporate Bond is more concentrated and more flexible than M&G Corporate Bond. Richard will also have greater conviction in varying the fund’s interest rate risk exposure.
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. This particular fund uses ESG analysis to protect from potential downside risks. This work is carried out by the in-house credit analyst team, which identifies the risks and potential impact, and determines whether this diminishes the investment opportunity.
As the fund manager, Richard can choose whether he wishes to take these risks. As well as identifying risks, understanding ESG can also be a source of returns, whereby a firm with a product or service that is a solution to ESG issues may have improved fundamentals as it capitalises on this opportunity.
The team uses a proprietary, firm-wide system for scoring ESG. This not only helps with thought leadership, but also supports monitoring and engagement 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
Because the fund has a broader remit than many of its sector peers, the manager is able to take more aggressive positions. However, historically it has been no more risky than the average sterling bond fund. This is likely due to the fund taking less interest rate risk in recent years, although this may change in the future should Richard change his view. The fund is also extremely well diversified.
See more
Read more about this fund
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.