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M&G Global Macro Bond - the flexible global bond fund

Richard Troue | Fri 17 August 2018

Investments can go down as well as up so there is always a danger that you could get back less than you invest. Nothing here is personalised advice, if unsure you should seek advice.
  • Significant investments in overseas bonds and currencies
  • A quarter of the fund is invested in higher-risk emerging market bonds
  • A great fund to diversify a bond portfolio away from the UK

Our View

Bond markets are large and complex. The outlook for inflation, interest rates and economic growth will affect performance. As will currency movements, and how well companies and countries are run.

But there are lots of opportunities too. The global bond market is much bigger than the global stock market. It offers opportunities to earn a decent income, grow the value of your investment, and, perhaps most importantly, invest in something that could perform differently to shares.

This is one of those funds that offers something a little different. We think one of the main benefits is the truly global approach. It often has a lot of investments in overseas bonds and currencies, particularly the US dollar.

Jim Leaviss, the fund’s manager, has a good track record of getting the big calls right and long-term performance has been excellent. He won’t get it right every time though and this is not a guide to how the fund will perform in future. We’re happy to retain it on the Wealth 150+ list of our favourite funds.

Current positioning

Jim Leaviss invests in government bonds, corporate bonds, and higher-risk types of bond that offer higher yields, including emerging market bonds.

Around a quarter of the fund is invested in emerging market bonds. This is an area that’s been quite volatile this year, but the manager can find good yields on offer in countries such as South Africa and Mexico. He thinks the long-term outlook is good and a patient approach will be rewarded.

There’s also quite a lot of the fund invested in US government bonds. The US is in a stronger position than most developed economies, and the Federal Reserve is further down the path of raising interest rates than the UK, Europe or Japan. As a result the yield on 10-year US government bonds has risen to around 3% and Jim Leaviss feels this is attractive.

There are fewer opportunities to be found among corporate bonds, according to the manager. He’s invested in some bonds issued by big banks, such as Citigroup and Barclays, as well as some utilities, telecoms and energy companies. He’s got virtually no exposure to higher-risk high-yield bonds at present. He doesn’t think the yields are attractive enough for the risks involved.

There’s also virtually no exposure to sterling because of the risks presented by Brexit. The US dollar, Japanese yen, and the euro account for most of the currency exposure. The manager can use derivatives, which help manage the fund‘s sensitivity to things like changes in interest rates, but can also add risk. The fund may invest more than 35% in securities issued or guaranteed by any one or more of the governments of Germany, Japan, the UK, and the USA, or other countries listed in the fund’s prospectus.

Performance

The fund’s bias towards the US dollar, and foreign currencies in general, means it has tended to do well when sterling is weak and vice versa. The strength of the US dollar has boosted the fund’s recent performance, for example. The same happened around the time of the UK’s referendum on EU membership in the summer of 2016.

This has helped the fund deliver a higher return than other funds in the IA Global Bond sector over the past five years. This is not a guide to how the fund will perform in future though.

M&G Global Macro Bond - 5 year performance

Past performance is not a guide to the future. Source: Lipper IM to 31/07/2018.

Annual percentage growth
July 2013 -
July 2014
July 2014 -
July 2015
July 2015 -
July 2016
July 2016 -
July 2017
July 2017 -
July 2018
M&G Global Macro Bond -6.5% 5.0% 21.3% 3.6% -1.2%
IA Global Bond -2.4% 0.4% 15.2% 2.8% -0.4%

Past performance is not a guide to the future. Source: Lipper IM to 31/07/2018.

Please read the Key Features/ Key Investor Information in addition to the information above.

Find out more about this fund (inc. charges)

Important information - Please remember the value of investments, and any income from them, can fall as well as rise so you could get back less than you invest. This article is provided to help you make your own investment decisions, it is not advice. If you are unsure of the suitability of an investment for your circumstances please seek advice. No news or research item is a personal recommendation to deal.


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