M&G (Lux) Optimal Income Fund

Objective and investment policy

Objective

The fund aims to provide a combination of capital growth and income to deliver a return based on exposure to optimal income streams in investment markets.

Investment policy and strategy

Core investment: The fund is a flexible fund where at least 50% will be invested in bonds. The fund invests in bonds issued by governments or companies in developed markets or emerging markets*. The investment manager has the freedom to invest across a broad range of bonds (such as government bonds, investment grade corporate bonds, high yield corporate bonds, unrated bonds and asset-backed securities), in any currency, wherever the greatest opportunities can be found.

Other investment: The fund may invest up to 20% in company shares when the investment manager believes that a company’s shares offer a better return than its bonds. The fund may also hold cash and assets that can be turned quickly into cash.

Use of derivatives: The fund invests directly and indirectly through derivatives. Derivatives may also be used to manage risks and reduce costs, as well as to offset the impact of currency exposures arising from the fund’s non-euro investments. Derivatives may also be used to generate market leverage (in other words, gain exposure to investment exceeding the value of the fund).

For more information on the types of bonds held and derivatives used, please refer to the Prospectus.


* Emerging market countries are defined as those included within the MSCI Emerging Markets Index and/or those included in the World Bank’s definition of developing economies, as updated from time to time.

Strategy in brief: The investment manager selects investments based on an assessment of a combination of macroeconomic, asset, sector and stock-level factors.

Spreading investments across issuers and industries 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.

Performance comparator: The fund is actively managed. A composite index comprising 1/3 Bloomberg Barclays Global Aggregate Corporate Index EUR Hedged, 1/3 Bloomberg Barclays Global High Yield Index EUR Hedged and 1/3 Bloomberg Barclays Global Treasury Index EUR Hedged is a point of reference against which the performance of the fund may be measured. These indices represent the global investment grade corporate, global high yield corporate and global government bond markets, respectively.

Glossary terms

Asset-backed securities: Bonds backed by assets that produce cashflows, such as mortgage loans, credit card receivables and auto loans.

Bonds: Loans to governments and companies that pay interest.

Derivatives: Financial contracts whose value is derived from other assets.

High yield bonds: Bonds issued by companies considered to be riskier and therefore generally paying a higher level of interest.

Investment grade corporate bonds: Bonds issued by a company with a medium or high credit rating from a recognised credit rating agency. They are considered to be at lower risk from default than those issued by companies with lower credit ratings.

Risks associated with the fund

The value and income from the fund's assets will go down as well as up. This will cause the value of your investment to fall as well as rise. There is no guarantee that the fund will achieve its objective and you may get back less than you originally invested.

Investments in bonds are affected by interest rates, inflation and credit ratings. It is possible that bond issuers will not pay interest or return the capital. All of these events can reduce the value of bonds held by the fund.

High yield bonds usually carry greater risk that the bond issuers may not be able to pay interest or return the capital.

The fund may use derivatives to profit from an expected rise or fall in the value of an asset. Should the asset’s value vary in an unexpected way, the fund will incur a loss. The fund’s use of derivatives may be extensive and exceed the value of its assets (leverage). This has the effect of magnifying the size of losses and gains, resulting in greater fluctuations in the value of the fund.

The fund is exposed to different currencies. Derivatives are used to minimise, but may not always eliminate, the impact of movements in currency exchange rates.

The hedging process seeks to minimise, but cannot eliminate, the effect of movements in exchange rates on the performance of the hedged share class. Hedging also limits the ability to gain from favourable movements in exchange rates.

In exceptional circumstances where assets cannot be fairly valued, or have to be sold at a large discount to raise cash, we may temporarily suspend the fund in the best interest of all investors.

The fund could lose money if a counterparty with which it does business becomes unwilling or unable to repay money owed to the fund.

Further details of the risks that apply to the fund can be found in the fund's Prospectus.

Other information

The Fund allows for the extensive use of derivatives.

Performance

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. The level of any income earned by the fund will fluctuate. Past performance is not a guide to future performance. 

Source: Price: State Street. Performance: Morningstar. Performance figures are on a price to price basis with income reinvested. Performance figures may not reflect all relevant charges.

Please note that the Morningstar Category performance data in this tool where shown, is from the default Morningstar database, which contains all the share classes for each fund available across Europe, Asia and Africa. This can differ from the comparative sector data in M&G factsheets which is from the same database, but showing only the most appropriate share class to represent each fund, and for just those funds available in Europe. Neither Morningstar nor its Information Providers can guarantee the accuracy, completeness, timeliness, or correct sequencing of any of the Information on the Web site, including, but not limited to Information originated by Morningstar, licensed by Morningstar from Information Providers, or gathered by Morningstar from publicly available sources. There may be delays, omissions, or inaccuracies in the Information.

 

Fund Team

Richard Woolnough

Richard Woolnough - Fund manager

Richard Woolnough joined M&G in January 2004 and is fund manager of the M&G (Lux) Optimal Income Fund, as well as of the M&G Optimal Income Fund, the M&G Corporate Bond Fund and the M&G Strategic Corporate Bond Fund, three of the company’s flagship UK-authorised fixed interest OEIC funds. Richard began his career at Lloyds Merchant Bank in 1985, moving to Italian insurer Assicurazioni Generali two years later, followed by SG Warburg. In 1995, he became a fund manager at Old Mutual. Richard graduated from the London School of Economics with a BSc in economics.

 Team member biography
Stefan Isaacs

Stefan Isaacs - Deputy Manager

Stefan Isaacs is Deputy Head of Retail Fixed Interest for M&G's mutual fund range. He joined M&G as a graduate in 2001 and was subsequently promoted to corporate bond dealer specialising in high yield bonds and euro-denominated credit. Stefan joined the fund management team in 2006 and was appointed fund manager of the M&G European Corporate Bond Fund in April 2007 and the M&G Global High Yield Bond Fund in October 2010. He is co-fund manager of the M&G (Lux) Floating Rate High Yield Solution, launched in August 2017 and the M&G (Lux) Global High Yield ESG Bond Fund, launched in October 2017. Stefan is also deputy fund manager of the M&G Optimal Income Fund, the M&G European High Yield Fund and the M&G Global Floating Rate High Yield Fund.

 Team member biography
Carlo Putti

Carlo Putti - Investment specialist

Carlo Putti is an associate investment specialist providing support for the M&G retail fixed interest fund range. He initially joined M&G in 2009, working on a part-time basis in the M&G Milan office, assisting the Italian Sales team. In 2013 Carlo moved to London, where he joined the M&G International Marketing team as a marketing executive before transferring to the M&G Retail Fixed Interest team nine months later. Carlo holds a degree in business economics from Cattolica University (Italy).

 Team member biography

Ratings

Rating is at a share class level

5 Star Rating

Ratings as at 31/01/2019. The Morningstar Overall Rating. Copyright © 2019 Morningstar UK Limited. All Rights Reserved. The Morningstar Analyst Rating™. © 2019 Morningstar. All Rights Reserved. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. Ratings should not be taken as recommendation.

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For Investment Professionals only. Not for onward distribution to any other type of client. No other persons should rely on the information contained on this website. Content should therefore be shared responsibly with other investment professionals. 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.