mandgs success a double-edged sword

Prudentials half-year results show M&G in rude health, achieving just under £5bn of inflows, but what does the future hold for a firm that leans heavily upon its fixed income success?

mandgs success a double-edged sword

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Municipal & General Securities Company has arguably now reached peak popularity in the UK, on a journey since pioneering the first ever unit trust here in 1931. The icing on the cake was surpassing of Invesco Perpetual in the IMA’s retail FUM standings earlier this year.

The secret to its success owes much to having the right products at the right time, most notably its bond fund range which has again proved remarkably popular this year. Richard Woolnough’s £8bn M&G Optimal Income Fund in particular is singled out in the review as having been the sixth best cross-border fund for net sales across Europe for the 12 months to May 2012.

Reports that M&G has been turning away larger investors from its corporate and strategic vehicles suggest that its marketing focus has shifted elsewhere. Tom Dobell’s ever-popular £7.5bn Recovery Fund remains its largest equity product, though it was Stuart Rhodes’ £3bn Global Dividend Fund that the review highlights as having been another of its strongest sellers. Again, this very much taps into retail investors’ ongoing insatiable appetite for income.

Covering all the bases

Still, there is not a single fund group that can cover all the bases and three M&G portfolios appeared on Bestinvest’s recent Spot the Dog report of those funds that “repeatedly fail to deliver”: American, European Strategic Value and Global Leaders.

“M&G are strong in a number of asset classes across equities, bonds and property, but for US and European equities they are not on our radar. I don’t think you can be strong at all times in every area,” says another fund picker Gavin Haynes, investment director at Whitechurch Securities.

“Certainly fixed interest is a key part of the business in terms of making up a large proportion of their assets under management and where their flows are coming from. If bonds do fall out of favour, or the client changes, then that is going to impact the business overall. But, the way they manage bonds is very much using a strategic approach and they will respond to changes of trends in fixed income markets.”

Multi-asset future

Fixed income aside, it is multi-asset funds that are earmarked to acquire assets quickly in a post-RDR world and M&G too wants a share of this incoming money with its rebranded Episode range. The firm has always been resolute in preferring not to pursue the multi-manager route as a one-stop shop to covering the asset class mix, so it will be interesting to see how well it succeeds against stiff competition in the multi-asset space.

M&G is in much better shape than most, but success can be a double-edged sword. Multi-billion pound funds cannot continue expanding indefinitely and, with the whole industry looking on enviously, it needs to hit the ground running with future ventures.
 

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