Objective and investment policy
The fund aims to provide a positive total return (combined income and capital growth) that matches or is greater than European inflation, as measured by Eurostat Eurozone Harmonised Index of Consumer Prices, over any three-year period.
Investment policy and strategy
Core investment: At least 50% of the fund is invested in inflation-linked investment grade corporate bonds.The fund may invest directly or indirectly by creating ‘synthetic’ bonds through the combination of inflation-linked government bonds and derivatives.
The fund may also use derivatives to reduce risk and costs and to manage the impact of changes in currency exchange rates on the fund’s investments.
Strategy in brief: The fund holds a range of bonds whose returns behave in a similar
way to inflation. However, the investment manager may seek alternative sources of
returns where it is felt that this will help achieve the fund’s objective. The investment
approach combines the assessment of macroeconomic factors with in-depth analysis
of the creditworthiness of individual bond issues.
The fund manager will typically
invest in European bonds but may also invest in bonds issued outside of the region and
in other currencies, based on where value is identified. The fund manager will normally
hold at least 90% of the fund in Euros.
Other investment: The fund may also invest in cash and deposits, preferred shares,
other debt instruments, warrants and other funds.
Bonds: Loans to governments and companies that pay interest.
Derivatives: Financial contracts whose value is derived from other assets.
Inflation-linked bonds: Bonds where both the value and the interest payments are adjusted in line with inflation until they are fully repaid.
Preferred shares: Shares which entitles the holder to a fixed dividend, whose payment takes priority over that of ordinary share dividends.
Warrants: Financial contracts that allow the fund manager to buy stocks for a fixed price until a certain date.
Risks associated with the fund
The value of investments and the income from them will rise and fall. This will cause the fund price, as well as any income paid by the fund, to fall as well as rise. There is no guarantee the fund will achieve its objective, and you may not get back the amount you originally invested.
The fund may take short positions through the use of derivatives which are not backed by equivalent physical assets. Short positions reflect an investment view that the price of the underlying asset is expected to fall in value. Accordingly, if this view is incorrect and the asset rises in value, the short position will cause the Fund to incur a loss.
Changes in currency exchange rates will affect the value of your investment.
The value of the fund will fall if the issuer of a fixed income security held is unable to pay income payments or repay its debt (known as a default). Fixed income securities that pay a higher level of income usually have a lower credit rating because of the increased risk of default. The higher the rating the less likely it is that the issuer will default, but ratings are subject to change.
In difficult market conditions, the value of certain fund investments may be less predictable than normal and, in some cases, this may make such investments harder to sell at the last quoted market price, or at a price that is considered to be fair. Where market conditions make it hard to sell the fund’s investments at a fair price in order to meet customers’ sale requests, we may temporarily suspend dealing in the fund’s shares.
The manager will place transactions (including derivative transactions), hold positions and place cash on deposit with a range of financial institutions. There is a risk that the financial institutions may fail to meet their obligations or become insolvent.
The Fund allows for the extensive use of derivatives. 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 German government, although this may vary subject only to those listed in the prospectus.
Past performance prior to 16 January 2018 is that of the M&G European Inflation Linked Corporate Bond Fund (a UK-authorised OEIC) which merged into this fund on 16 March 2018. Tax rates and charges may differ.
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.