BrilliantWithMoney

This is a first in a new series of ‘focus on’ articles, each looking at a specific investment fund within our top sixty. We take an in-depth look at each fund to give you an insight into what it takes to make the grade.

Each ‘focus on’ examines the objective of the fund, an analysis of recent performance, the manager, charges and other factors.

We start by taking a closer look at the M&G Strategic Corporate Bond fund. This fund sits within the UK Corporate Bonds asset class.

Fund objective

This fund aims for an absolute return (the combination of income and capital growth) by investing in mainly investment grade corporate bonds. However, it can also invest in other fixed interest securities, including higher yielding corporate bonds, government debt and convertible and preference stocks. In addition this fund is able to invest in money market instruments and equities.

M&G Strategic Corporate Bond is quite similar to the M&G Corporate Bond fund, but the mandate is less constrained. This means that the manager, Richard Woolnough, is able to invest in overseas bonds and up to 20% of the fund value in higher yielding bonds. When he does invest in overseas corporate bonds, these are hedged to reduce currency risk.

Track record

This is a first quartile fund over one, three and five years. For the year to date it has returned 20.88% compared to a sector average return of 1.74%. This places it first out of 182 funds in the sector.

This is a fund with a very strong and consistent performance track record. More recent figures buck this trend slightly, with third quartile returns and the fund delivering 11.65% against a sector average of 12.56% over the last three months, but in the context of the longer term performance this is easy to ignore.

The manager

The man in charge of this fund is Richard Woolnough. He has been at the helm for five and a half years, since joining M&G in January 2004.

Woolnough became a trainee gilt salesman with Lloyds Merchant Bank after leaving University and subsequently worked as a gilt salesman for Prudential-Bache Securities. He became a fund manager in 1987, with experience in equities as well as Sterling bonds.

He has been described in the past as a ‘flair manager’ with a great deal of confidence backing his investment decisions. Woolnough has a ‘AAA’ Citywire manager rating.

Style

This fund follows a ‘top-down’ investment approach, with the economic outlook of the manager driving the duration of assets within the portfolio as well as decisions on asset classes and sectors. In addition to the ‘top-down’ views of the manager, the in-house credit analysts at M&G supply ‘bottom-up’ analysis of the corporate bond markets.

Charges

This fund offers two different share classes; A and X.

Share Class A has a 3% initial charge and 1% annual management charge (AMC), but no withdrawal fee. Share Class X has nil initial charge, 1.25% AMC and a withdrawal fee.

Retail investors are more likely to select Share Class A, which has a total expense ratio of 1.16%.

Conclusion

This is a consistently top-performing fund with a distinct investment style and capable manager in charge. It will suit investors looking for corporate bond exposure within their portfolio during volatile and uncertain economic times when the ability for the manager to change weightings at the drop of a hat is desirable.

Martin Bamford is site editor of BrilliantWithMoney and a Chartered Financial Planner at Informed Choice.

The small but important print: This article was produced for information only and should not be considered a recommendation to buy, sell or hold a particular investment fund. Seek advice from a professional independent financial adviser before making a decision. The performance data in this article was provided by Financial Express and was correct as at 8th August 2009.