The M&G Optimal Income Fund

Apologies for the low number of posts this week – we’ve been preparing for Friday’s (8th December) launch of the new M&G Optimal Income Fund, run by Richard Woolnough. This is our first “specialist” bond fund to utilise UCITS III wider powers, and allows the fund manager to have a lot of flexibility in managing exposures to different bond asset classes (i.e. high yield, governments, investment grade) as well as being able to use derivatives to manage both duration and credit risk. For the first time we will be able to express a negative view on a company’s bonds as well as a positive one – which given that bond fund management is a lot about identifying the downside risks to companies is a good development. Richard’s initial portfolio also contains about 10% in equities where we think that the potential returns from the shares look more attractive than those of the bonds – this might be the case if the equity yield is higher than the bond yield, or if we consider the company to be a target for an LBO through a private equity bid. This is likely to be a riskier bond fund than normal, so click through to see health warnings etc.