M&G’s €126 billion AUM Public Fixed Income investment division is launching an 18-month fixed maturity bond strategy for European investors to capture the most compelling opportunity presented in credit markets in the past decade.
After years in which yields hovered around and below zero in Eurozone markets, rising inflation and tighter monetary policies have pushed yields upwards, making fixed income investing attractive again. As the tightening cycle seems to be approaching its end, the M&G (Lux) Fixed Maturity Bond 2 fund aims to lock in attractive annualised yields between 4.6% and 4.8% over a sharp 18-month period, based on current market conditions estimation.
Offering a diversified approach and a pick-up to most single Euro sovereigns, the fund will invest mainly in euro denominated Investment Grade bonds, accessing some of the best opportunities across credit markets globally. To enhance the return potential, the fund will invest in high yield bonds with minimum rating B- (up to 35%, with a target allocation of 25%), whilst maintaining an investment grade average rating at fund level.
The new strategy will be co-managed by a team with industry-leading credit experience: Stefan Isaacs, Deputy CIO of M&G’s Public Fixed Income, and Matthew Russell, who have been managing the M&G (Lux) Short Dated Corporate Bond Fund strategy since 2018. Fund managers will be supported by M&G’s strong in-house research team to exploit price inefficiencies and identify the most rewarding opportunities with a buy and hold approach.
Commenting on the launch, Stefan Isaacs said: “Fixed income is in vogue right now with meaningful yields on offer for the first time in a decade. The inversion of the yield curve means investors can get most of the yield available in corporate bonds without having to stretch to long maturities. This 18-month short maturity strategy can offer an opportunity to lock in compelling positive yield levels available now with relative low risk and high visibility on returns.”
The fund, article 8 under SDFR, will be available for subscription from September 25 until November 3, 2023.
Key Features of the M&G (Lux) Fixed Maturity Bond Fund 2
- Fund domicile: Luxemburg
- Fund currency: EUR
- Subscription period: September 25 – 3 November
- Launch date: 7 November
- Maturity: 18 months
- Investment policy : The Fund invests at least 65% of its Net Asset Value in investment grade debt securities. These securities can be issued or guaranteed by governments and public issuers, and companies. Issuers can be located anywhere in the world, including emerging markets. The Fund may invest up to 35% in below investment grade and unrated debt securities.
- Recommended holding period: 18 months
- Target yield (per annum): 4.6%- 4.8%
- Average rating: BBB