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More than half of M&G funds require improvement, value assessment finds

23 July 2021

Despite improving on last year, the asset manager has struggled again in 2021

By Jonathan Jones,

Editor, Trustnet

Asset manager M&G has admitted 58% of its funds ‘require improvement’ in its latest value assessment report, with £2.5bn worth of investors’ cash in underperforming share classes.

The report highlighted 29 funds with multiple share classes where performance had not met expectations. These portfolios have a collective £21.5bn in assets under management (AUM), although the firm said 92.1% of all money invested with M&G was in share classes that had ‘delivered value’.

The figures, which suggest investors have more chance of picking a poor-performing fund than one that delivers value, are an improvement on its 2020 report.

Last year, the firm said 67.8% of funds required improvement, with a further 3.9% ‘unsatisfactory’. There were no funds in the latter category this time around.

M&G chief investment officer Jack Daniels said there was “still work to be done”, but added that it would “take time” for the firm’s actions to be reflected in fund performance.

“We’re optimistic about improved performance – it’s a dynamic process that we monitor closely – and continue to invest into active investment management as we believe in the long-term value creation it can provide our customers and clients,” he said.

Among those in need of a turnaround was the £1.2bn M&G Property Portfolio. All five of its share classes were given a ‘must improve’ rating. Managed by Justin Upton, the portfolio has made a loss of 12.9% over three years during a particularly difficult period for property funds, which were forced to close during the pandemic to avoid an avalanche of investor withdrawals.

The M&G Pan European Select Smaller Companies fund shared a similar fate, with all four of its share classes falling under the same rating.

The report said “we are unable to conclude that the fund has delivered value to investors over the review period”, adding that the firm will continue to monitor performance closely.

Performance of fund vs sector & benchmark over 5yrs

 

Source: FE Analytics

Over five years, the £137m fund has made a total return of 67.8%, compared to 80.1% for its EMIX Smaller European Companies benchmark and 84.7% for the average fund in the IA European Smaller Companies sector.

One area the firm has improved upon is fees. Lawrence Mumford, chair of M&G Securities Limited, said 2020 had not delivered value to M&G’s UK based funds, but added that charges on these funds had been cut.

“We have made them more competitively priced relative to their peers, meaning many investors can now enjoy greater potential returns over the year ahead,” he said.

Across the whole range, only one share class was deemed to offer ‘outstanding’ value – the PP share class of the M&G Global Macro Bond fund, which has been managed by Jim Leaviss since 1999.

According to the team at FE Investments: “The fund offers attractive diversification characteristics and has proven effective at preserving capital during periods of market stress. Leaviss benefits from working closely with other portfolio managers that hold niche expertise in emerging markets and currencies.”

Performance of fund vs sector over managers tenure

 

Source: FE Analytics

Over Leaviss’ tenure, the fund has returned 194.3% while its average IA Global Mixed Bond peer made 156%.

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Data provided by FE fundinfo. Care has been taken to ensure that the information is correct, but FE fundinfo neither warrants, represents nor guarantees the contents of information, nor does it accept any responsibility for errors, inaccuracies, omissions or any inconsistencies herein. Past performance does not predict future performance, it should not be the main or sole reason for making an investment decision. The value of investments and any income from them can fall as well as rise.