For Investment Professionals only INVESTMENTS. Guide to. Fixed Income

Transcription

1 For Investment Professionals only INVESTMENTS Guide to Fixed Income

2 2 Guide to M&G Fixed Income

3 Guide to M&G Fixed Income 3 Introduction As history has shown, there is no best environment for bonds. Government bonds normally do well in times of low interest rates, low inflation and low growth. Bonds issued by companies tend to hold up better in periods of strong economic growth and rising interest rates. There are even bonds that pay a coupon, or income, that rises in line with interest rates. Therefore, it is important to consider what differentiates one bond investment from another. The Fixed Interest team at M&G manages a wide range of bond funds, offering access to all the main types of fixed income assets. Our expertise, which has helped us to become one of Europe s largest active fund management groups, goes back more than 80 years. Of the 286 billion 1 of funds under management, 178 billion 1 were in fixed interest assets. Our fund managers have the freedom to act on their convictions, allowing them to make the best long-term decisions for our clients investments, whatever happens in the markets. Each fund has its own specific investment strategy, but they can be broadly split into four categories, according to the type of environment that would typically be most conducive for performance. We also offer a range of flexible bond funds that can invest across fixed income markets. 1 as at 30 June 2018 Fund M&G Gilt & Fixed Interest Income Fund M&G Index-Linked Bond Fund M&G Global Government Bond Fund M&G UK Inflation Linked Corporate Bond Fund M&G Short Dated Corporate Bond Fund M&G Global Floating Rate High Yield Fund M&G Corporate Bond Fund M&G Strategic Corporate Bond Fund M&G Global Corporate Bond Fund M&G European Corporate Bond Fund M&G Emerging Markets Bond Fund M&G European High Yield Bond Fund M&G Global High Yield Bond Fund M&G Optimal Income Fund M&G Global Macro Bond Fund M&G Absolute Return Bond Fund Principal asset class Government bonds FRNs/short-dated/inflation-linked corporate bonds Investment-grade corporate bonds High yield/ emerging market bonds Different types of bonds for performance Economic slowdown Rising rates Low rates/steady growth Low yield environment Flexible The value of investments will fluctuate, which will cause fund prices to fall as well as rise and you may not get back the original amount you invested.

4 4 Guide to M&G Fixed Income M&G s Retail Fixed Interest team Jim Leaviss 21 Head of Retail Fixed Interest Ben Lord Fund Manager 23 Wolfgang Bauer Fund Manager 5 Richard Woolnough Fund Manager Stefan Isaacs Fund Manager Matthew Russell Fund Manager Claudia Calich Fund Manager James Tomlins Fund Manager Years at M&G Years of investment experience

5 Guide to M&G Fixed Income 5 Awards We have been recognised by independent authorities within the industry. Sharing Alpha "' Winner 2017, ~J Fund Awards } 2017, Emerging Markets Fixed Income Winner M&G Emerging Markets Bond Fund ~A ~~ rds2017 Winner Bonds 2017, Bonds Winner M&G Emerging Markets Bond Fund INVESTMENT u1@~!~~ur:rn WINNER Global Bond,a 2017, Fund Manager of the Year Jim Leaviss, Global Bonds FUibTw aros 20n PIATIlntematlonall>ond.Ill 2017, Platinum Award for International Bond M&G Global Macro Bond Fund FEALPHA MANAGER 2016 BONDS RICHARDwca.ID.JGH (M&G) 2016, Specialist Bond Fund of the Year M&G Global Macro Bond Fund 2016, Sterling Corporate Bond of the Year Corporate Bond Fund 2016, FE Alpha Manager of the Year Richard Woolnough, Bonds Past performance is not a guide to future performance. Awards should not be taken as a recommendation.

6 6 Guide to M&G Fixed Income Economic slowdown M&G Gilt & Fixed Interest Income Fund The fund aims to provide income and capital growth by investing mainly in UK government bonds (gilts) of all maturities, based on the fund manager s view of the likely course of the UK economy and monetary policy. The fund manager s investment approach is driven primarily by macroeconomic factors such as views on inflation, interest rates and economic growth. Economic slowdown Launch date 9 December million IA UK Gilts Matthew Russell The fund manager invests at least 70% of the portfolio in securities issued by the UK government. M&G Index-Linked Bond Fund The fund aims to provide income and capital growth by investing in index-linked bonds (securities where both the value of the loan and its interest payments are adjusted in line with inflation over its life). The majority of these are issued by the UK government, while the fund also invests in bonds issued by governments of other developed countries such as the US and Japan. The fund manager s investment approach begins with a top-down assessment of the macroeconomic environment, including the likely path of growth, inflation and interest rates. The results of this analysis help the manager to decide the fund s duration positioning and its allocation to the various country markets. Economic slowdown Launch date 4 October million IA UK Index Linked Gilts Ben Lord The fund may invest more than 35% in securities issued by any one or more of the governments listed in the fund prospectus. Such exposure may be combined with the use of derivatives in pursuit of the fund objective. It is currently envisaged that the fund s exposure to such securities may exceed 35% in the UK government, although this may vary subject only to those listed in the prospectus.

7 Guide to M&G Fixed Income 7 M&G Global Government Bond Fund The fund aims to provide income and capital growth by investing mainly in investment grade government debt securities on a global basis, including the UK. The fund may allocate up to 30% of its assets to noninvestment grade government debt securities. The fund manager s investment approach begins with a top-down assessment of the macroeconomic environment. This analysis determines which individual government bonds the fund manager chooses to invest in and which currencies the fund will be exposed to. Economic slowdown Launch date 4 October million IA Global Bonds Claudia Calich The fund may invest more than 35% in securities issued by any one or more of the governments listed in the fund prospectus. Such exposure may be combined with the use of derivatives in pursuit of the fund objective. It is currently envisaged that the fund s exposure to such securities may exceed 35% in the governments of Germany, Japan, UK, USA although these may vary subject only to those listed in the prospectus. The value of investments and the income from them will rise and fall. This will cause the fund prices, as well as any income paid by the funds, to fall as well as rise. There is no guarantee the funds will achieve their objectives, and you may not get back the amount you originally invested. These funds allow for the extensive use of derivatives. *As at 31 August 2018

8 8 Guide to M&G Fixed Income Rising rates M&G UK Inflation Linked Corporate Bond Fund The fund aims to protect the value of capital and income from the potentially damaging effects of inflation by generating a return at least consistent with UK inflation over any three to five-year period, although this is not guaranteed. This innovative fund combines the attractiveness of investment grade corporate bonds with inflation protection. It has a significantly shorter duration profile than traditional bond funds and can even move to a negative duration position in order to benefit from rising bond yields. Rising rates Launch date 16 September billion IA Strategic Bond Ben Lord M&G Short Dated Corporate Bond Fund The fund aims to provide capital growth and income by investing in bonds issued by high-quality companies that typically have short repayment dates. These can include short-dated corporate bonds and floating rate notes whose interest payments rise in tandem with any increase in interest rates. The fund is short duration by design, helping to cushion it from rises in bond yields/interest rates. It is actively managed and its investment approach combines the assessment of macroeconomic factors with in-depth credit analysis. Rising rates Launch date 29 January million IA Corporate Bond Matthew Russell The fund may invest more than 35% in securities issued by any one or more of the governments listed in the fund prospectus. Such exposure may be combined with the use of derivatives in pursuit of the fund objective. It is currently envisaged that the fund s exposure to such securities may exceed 35% in the UK government, although this may vary subject only to those listed in the prospectus.

9 Guide to M&G Fixed Income 9 M&G Global Floating Rate High Yield Fund The fund aims to provide capital growth and income by investing mainly in high yield floating rates notes (FRNs). These pay a variable rate of income, which is regularly reset in line with changes in interest rates. If interest rates rise, investors in FRNs will benefit from a higher income as their coupons are automatically adjusted upwards (and vice versa). The fund is designed to provide an attractive level of income, along with a natural hedge against rising interest rates. A globally diversified portfolio, the fund manager has the flexibility to invest in the most compelling opportunities across the US, Europe and emerging markets. The value of investments and the income from them will rise and fall. This will cause the fund prices, as well as any income paid by the funds, to fall as well as rise. There is no guarantee the funds will achieve their objectives, and you may not get back the amount you originally invested. These funds allow for the extensive use of derivatives. *As at 31 August 2018 Rising rates Launch date 11 September billion IA High Yield James Tomlins Changes in currency exchange rates will affect the value of your investment.

10 10 Guide to M&G Fixed Income Low rates/steady growth M&G Corporate Bond Fund The fund invests mainly in high-quality corporate bonds, with the aim of providing income and capital growth. At least 70% of the fund is invested in sterling-denominated investment grade debt. The investment approach is very much topdown, with the fund manager s economic outlook determining both the portfolio s duration, and its sector and asset allocation. This is complemented by M&G s in-house team of credit analysts, who provide bottom-up analysis of the corporate bond markets. Low rates/steady growth Launch date 15 April billion IA Corporate Bond Richard Woolnough M&G Strategic Corporate Bond Fund The fund aims to provide income and capital growth by investing mainly in investment grade corporate bonds. It has a slightly more flexible mandate than the fund manager s other sterling-denominated investment grade fund, the M&G Corporate Bond Fund, and provides him with greater scope to express his investment views. The fund is managed according to the belief that the key to successful corporate bond investing lies in avoiding the losers rather than picking the winners. The portfolio is constructed through a combination of top-down and bottom-up strategies. Low rates/steady growth Launch date 20 February billion IA Corporate Bond Richard Woolnough

11 Guide to M&G Fixed Income 11 M&G Global Corporate Bond Fund The fund aims to provide income and capital growth by investing mainly in investment grade, or highquality, corporate bonds from around the world, denominated in any currency. The fund manager also has the flexibility to invest in high yield or government bonds if he finds them attractive. The fund manager looks in particular at bonds from the same or similar companies that are issued in different markets (for example, the US, the UK and Europe), and seeks to buy the bonds believed to offer the best relative value opportunities. M&G European Corporate Bond Fund The fund invests mainly in European investment grade corporate bonds, with the aim of providing income and capital growth. It also has the flexibility to invest in high yield or government bonds. The fund manager believes returns are driven by a combination of macroeconomic, asset, sector, geography and stock-level factors. Spreading investments across issuers, industries and countries is an essential element of the fund s strategy and the manager is assisted in the selection of individual bonds by an in-house team of analysts. Low rates/steady growth Low rates/steady growth Launch date 5 September 2013 Launch date 13 January million 1.5 billion IA Corporate Bond Ben Lord Changes in currency exchange rates will affect the value of your investment. Morningstar EUR Corporate Bond Stefan Isaacs Changes in currency exchange rates will affect the value of your investment The value of investments and the income from them will rise and fall. This will cause the fund prices, as well as any income paid by the funds, to fall as well as rise. There is no guarantee the funds will achieve their objectives, and you may not get back the amount you originally invested. These funds allow for the extensive use of derivatives. *As at 31 August 2018

12 12 Guide to M&G Fixed Income Low yield environment M&G Emerging Markets Bond Fund The fund aims to provide income and growth of capital by investing mainly in emerging market government and corporate bonds. The fund manager selects investments based on an assessment of global, regional, and countryspecific macroeconomic factors, followed by in-depth analysis of individual bond issuers. She is assisted in the selection of individual bonds by the deputy fund manager and an in-house team of analysts. The fund is diversified by investing in a range of bonds from across the global emerging markets. Low yield environment Launch date 15 October million IA Global Emerging Markets Bond Claudia Calich The fund will invest in emerging markets which are generally smaller, less liquid and more sensitive to economic and political factors. In exceptional circumstances, the fund may encounter difficulties when selling or collecting income from these investments, which could cause the fund to incur a loss. In extreme circumstances, it could lead to the temporary suspension of dealing in shares in the fund. M&G European High Yield Bond Fund The fund aims to provide income and capital growth by investing mainly in high yield bonds issued in any European currency. Bonds issued by companies with a low credit rating, typically pay higher levels of interest to compensate investors for the greater risk of default. The fund manager also has the flexibility to invest in other fixed income assets, such as government bonds, or other regions, such as the US. The fund manager has the freedom to decide which investments to hold in the fund, based on in-depth research and monitoring of the creditworthiness of the bond issuer. Low yield environment Launch date 15 October million Morningstar Europe High Yield Bond James Tomlins The value of the fund may fall if the issuer of a fixed income security held is unable to pay income payments or repay its debt (known as a default).

13 Guide to M&G Fixed Income 13 M&G Global High Yield Bond Fund The fund aims to provide income and capital growth by investing in high yield bonds denominated in any major global currency. The fund managers investment approach concentrates on bottom-up analysis of individual bond issues whilst remaining aware of macroeconomic developments. There is a focus on proprietary research rather than external ratings and credits risk is constantly monitored and always well diversified. Low yield environment Launch date 16 October billion IA High Yield Stefan Isaacs James Tomlins The value of investments and the income from them will rise and fall. This will cause the fund prices, as well as any income paid by the funds, to fall as well as rise. There is no guarantee the funds will achieve their objectives, and you may not get back the amount you originally invested. Changes in currency exchange rates will affect the value of your investment. These funds allow for the extensive use of derivatives. *As at 31 August 2018

14 14 Guide to M&G Fixed Income Flexible M&G Optimal Income Fund This flexible bond fund, which aims to provide income and capital growth, gives its manager the freedom to invest across a broad range of bonds (government bonds, investment grade corporate bonds, and high yield bonds), wherever the greatest opportunities can be found. The fund may invest a portion (up to 20%) in company shares when the fund manager believes that a company s shares offer a better return than its bonds. The investment approach begins with a top-down assessment of the macroeconomic environment, including the likely path of growth, inflation and interest rates. The results of this analysis help inform the fund s duration positioning and its allocation to the various bond asset classes. This is married with bottom-up individual credit selection, carried out in conjunction with M&G s in-house team of credit specialists. Flexible Launch date 8 December billion IA Strategic Bond Richard Woolnough M&G Global Macro Bond Fund The fund is a flexible global bond fund, whose investment approach is driven primarily by the fund manager s views on macroeconomic factors such as economic growth, interest rates and inflation. This assessment determines the asset classes in which he believes the fund should invest in order to achieve its objective of providing income and capital growth over five years or more. It also influences the portfolio s mix of interest rate risk, credit risk and currency exposure, as well as the subsequent holdings. The fund may invest globally across different types of fixed income securities, and across different currencies. By investing in a globally diversified portfolio, the fund s returns will include a higher degree of currency risk than domestic fixed interest funds. Flexible Launch date 15 October billion IA Global Bonds Jim Leaviss Changes in currency exchange rates will affect the value of your investment.

15 Guide to M&G Fixed Income 15 M&G Absolute Return Bond Fund The fund is a flexible, multi-strategy bond fund that aims to deliver combined income and capital growth of at least the cash rate plus 2.5% a year (before charges) over any three-year period, with a specific focus on managing volatility and limiting losses during difficult market conditions. The fund has a highly diversified portfolio, providing exposure to a broad range of fixed income strategies across global credit, government bond and currency markets. It draws on the best ideas of M&G s Fixed Interest team, giving investors access to an extensive range of investment knowledge across global bond markets. Flexible Launch date 13 December 2016 The value of investments and the income from them will rise and fall. This will cause the fund prices, as well as any income paid by the funds, to fall as well as rise. There is no guarantee the funds will achieve their objectives, and you may not get back the amount you originally invested. The M&G Global Macro Bond Fund & the M&G Absolute Return Bond Fund may invest more than 35% in securities issued by any one or more of the governments listed in the funds prospectus. Such exposure may be combined with the use of derivatives in pursuit of the funds objective. It is currently envisaged that the fund s exposure to such securities may exceed 35% in the governments of Germany, Japan, UK, USA although these may vary subject only to those listed in the prospectus. These funds allow for the extensive use of derivatives million IA Targeted Absolute Return Jim Leaviss Wolfgang Bauer *As at 31 August 2018

16 Contact Financial Adviser Helpline For further information on the M&G fund range, just speak to your usual M&G representative or call our Financial Adviser Helpline. Lines are open Monday to Friday 8.00am to 6.00pm. Investment Sales Team This team will help if you wish to speak to a Sales Consultant who covers your area. Lines are open Monday to Friday, 9.00am to 5.00pm. Calls cost 5p per minute, plus your phone company s access charge. About M&G From launching the UK s first unit trust for private investors in 1931, M&G has grown to become one of the larger investment managers in Europe, with 285 billion 4 of funds under management. We retain our belief that an active approach to investing can deliver strong performance over the long term. Our experienced and talented investment expert can follow their own original thinking and convictions, rather than the crowd. The value of investments will fluctuate, which will cause fund prices to fall as well as rise and investors may not get back the original amount invested. 4 As at 30 June 2018 mandg.co.uk/adviser info@mandg.co.uk 3 M&G Investments Write to us M&G Customer Relations PO Box 9039 Chelmsford CM99 2XG 2 For your protection calls may be recorded or monitored. Before assisting you with your enquiry, we will ask you to: Identify yourself Provide your firm s FCA number Confirm certain information relating to our mutual customer 3 Please note that information contained within an cannot be guaranteed as secure. We advise that you do not include any sensitive information when corresponding with M&G in this way. INVESTMENTS For financial advisers only. Not for onward distribution. No other persons should rely on any information contained within. Source of data: M&G as at This financial promotion is issued by M&G Securities Limited which is authorised and regulated by the Financial Conduct Authority in the UK and provides ISAs and other investment products. The company s registered office is Laurence Pountney Hill, London EC4R 0HH. Registered in England No OCT 18 /