M&G (Lux) Global Target Return Fund

ISIN
LU1531594833

Price (17.10.2018)
9.91

% Price Change
0.16

Objective and investment policy

Objective

The fund aims to deliver combined income and capital growth of at least the cash rate plus 4% a year over any three-year period. That is before any charges are taken and in any market conditions. The cash rate is based on the three-month EURIBOR rate at which banks borrow money from each other. The fund aims to achieve this while seeking to minimise the degree to which the value of the fund fluctuates over time, and also seeking to limit monthly losses. Managing the fund in this way reduces its ability to achieve returns significantly above three-month EURIBOR plus 4%. There is no guarantee that the fund will achieve a positive return over any period. Investors may not get back the original amount they invested.

Investment policy

The fund has a highly flexible investment approach with the freedom to hold different types of assets issued anywhere in the world. The manager can allocate capital between asset classes in response to changing economic conditions and asset prices moving below their ‘fair’ value where investors react emotionally to events. The blend of assets held in the fund is regularly adjusted depending on where the manager sees the most value, and to manage risks in order to limit losses. The manager looks to manage risk by combining diversified and relatively uncorrelated assets (which are affected by market conditions in different ways) and by employing derivatives strategies to help protect or profit from falling markets. Where the fund manager believes it appropriate, the fund may hold a high level of cash. The fund will primarily invest in bonds (loans to governments or companies paying a rate of interest), company shares, currencies, cash and near cash (short-term and easily tradeable bonds). The fund will mostly gain exposure to these assets by investing through derivatives, and by investing directly. It may also invest through other funds. The fund will typically take positions at index, sector or thematic level but it may also take positions in individual shares or bonds. Derivatives are financial contracts with a value derived from one or more underlying assets. The fund may also use derivatives to reduce risk, to benefit from the fall in price of specific assets, and to gain exposure to investments exceeding the value of the fund in order to increase potential returns. The fund may also invest in deposits and warrants (allowing the fund manager to buy stocks for a fixed price until a certain date) which may be from anywhere in the world and denominated in any currency. Derivatives the fund may invest in include: • Spot and forward contracts (bespoke agreements to buy or sell assets at a specified price at a future date) • Exchange-traded futures (standard agreements to buy or sell currencies, shares, bonds or interest rates at a future date at a predetermined price) • Swaps (agreements which involve exchanging cashflows with another party), including fixed or index-linked interest rate swaps, inflation-linked interest rate swaps, shares, bonds, currency, or other asset swaps • Single company and index credit default swaps. These contracts are meant to exchange the credit risk between parties.

For example, they can be used to protect the fund against potential defaults of companies, group of companies or governments • Options on shares, bonds, currencies or indexes (options offer the right or the obligation to buy or sell an asset at an agreed price and time). Bonds the fund may invest in include: • Bonds classified as ‘investment grade’ by one of the recognised ratings agencies (that is, rated ‘BBB-’or above by Fitch or Standard & Poor’s, or ‘Baa3’ or above by Moody’s) • Bonds issued or guaranteed by companies, governments, local authorities, government agencies or certain public international bodies • Convertible bonds (bonds issued by companies that give the bondholder the option to trade in the bond for shares in the company) • Up to 60% in ‘sub-investment grade’ bonds (that is, rated lower than ‘BBB-‘ by Fitch or Standard & Poor’s, or lower than ‘Baa3’ by Moody’s) which will not be rated below ‘CCC’ • Bonds from issuers located in emerging markets • Up to 20% in contingent convertible bonds (bonds issued by companies which convert into shares in the company when certain conditions are met) • Up to 10% in asset-backed securities (tradeable market instruments whose income and therefore value derives from a specified group of underlying assets). The fund may also enter into total return swaps (agreements which involve exchanging flows of income and capital gains from an underlying asset with another party). The fund’s exposure through total return swaps will generally not exceed 25% of the fund’s value. The maximum which can be subject to total return swaps is 50% of the fund’s value.

Investment policy and strategy

The investment manager has a very flexible top-down approach to the allocation of capital between different types of assets in response to changes in economic conditions and asset values. This approach combines in-depth research to work out the value of assets over the medium to long term, with analysis of market reactions to events to identify investment opportunities. In particular, the investment manager seeks to respond when asset prices move away from a reasonable sense of 'fair' long-term value due to market reactions to events.

The blend of assets held in the fund is regularly adjusted depending on where the investment manager sees the most value and to manage risks in order to limit losses. The investment manager will seek to manage risk by investing globally across multiple asset classes, sectors, currencies and countries and by combining diversified and relatively uncorrelated assets (which are assets affected by market conditions in different ways). The investment manager will also employ derivatives strategies to help protect or profit from falling markets. 

The fund will typically take investment positions at index, or sector level, or invest in a basket of assets to exploit certain investment themes (for example, shares in companies with exposure to a certain country or region) but it may also take positions in individual shares or bonds.

Risks associated with the fund

The value of investments and the income from them will fluctuate. This will cause the fund price to fall as well as rise. These fluctuations may be more extreme in periods of market disruption and other exceptional events. There is no guarantee the fund objective will be achieved and you may not get back the original amount you invested.

Derivatives may be used to generate exposure to investments exceeding the net asset value of the fund, thereby exposing the fund to a higher degree of risk. As a result of increased market exposure, the size of any positive or negative movement in markets will have a relatively larger effect on the net asset value of the fund. The additional exposure will however be limited to such an extent as to not materially increase the price fluctuations of the fund, in comparison to equivalent funds that do not use derivatives in this way.

 The fund may take short positions through the use of derivatives. 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.

Currency exchange rate fluctuations will impact the value of your investment.

If the share class is hedged (H share class), it aims to mirror the performance of another share class. There will be imperfections with any hedging strategy, and it cannot be guaranteed that the hedging objective will be achieved. The hedging strategy may substantially limit holders of the hedged share class from benefiting if the hedged share class currency falls against the US dollar.

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 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 fund manager will place transactions (including derivative transactions), hold positions and place cash on deposit with a range of counterparties (institutions). There is a risk that counterparties may default on their obligations or become insolvent.

Other information

The Fund allows for the extensive use of derivatives.

Fund Team

Tristan Hanson - Fund manager

Tristan Hanson was appointed fund manager of the M&G Global Target Return Fund upon its launch in December 2016. Tristan has over 15 years of experience in asset management and joined M&G in April 2016 from Ashburton Investments, where he started in 2008 and was appointed Head of Asset Allocation with responsibility for global multi-asset funds in 2010. Prior to this, Tristan worked as a Strategist at JP Morgan Cazenove from 1999 to 2006, covering equities, fixed income and currencies.

Tristan holds a Master in Public Administration in International Development from Harvard University’s Kennedy School of Government and a BA (Hons) in Economics from Durham University. He is a Chartered Fellow of the CISI.

 Team member biography
Craig Simpson

Craig Simpson - Deputy Manager

Craig Simpson was appointed co-deputy fund manager of the M&G Global Target Return Fund from launch in December 2016. He joined M&G in 2004 as a portfolio manager and is a member of the Multi Asset team, with over 15 years’ experience in the investment industry. In February 2015, he was appointed Head of Portfolio Management for the Multi Asset team. Prior to joining M&G, Craig was a trainee fund manager at Equitable Life Assurance and an analyst at Pictet Asset Management. He graduated from the University of Aberdeen with a degree in land economics.

 Team member biography
Eric Lonergan

Eric Lonergan - Deputy Manager

Eric Lonergan joined M&G in 2006 as a member of Dave Fishwick’s Multi Asset team. He is co-manager of the M&G Episode Macro Fund and the M&G Episode Growth Fund, and deputy manager of the M&G Global Target Return Fund. Prior to joining M&G, Eric was managing director and head of macro research at JP Morgan Cazenove. He has a BA in politics, philosophy and economics from Pembroke College, Oxford, and an MSc in economics from the London School of Economics.

 Team member biography
Christophe Machu

Christophe Machu - Investment specialist

Christophe Machu joined the Multi Asset and Convertibles teams as an associate investment specialist providing support for M&G's multi-asset fund range and the M&G Global Convertibles Fund in September 2014. He initially joined M&G in 2012 as a sales support in Paris before moving into the International Marketing team in London. Christophe has an MSc in risk and finance from EDHEC Business School.

 Team member biography

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