M&G aims to exploit “sweet spot” with new fund

M&G has unveiled a Global Convertibles fund. Its manager, Léonard Vinville, aims to generate returns from a selection of 40-60 convertible bonds.

About two-thirds of the fund is common with the convertibles allocation of the Prudential With Profit Life Fund, run by Vinville since 2002.

Convertibles are corporate bonds, which give the holder the option, but not the obligation, to exchange the bond for shares in the issuing company, at a specified price.

Their value is influenced by a range of factors, including interest rates, issuer credit quality, share price and time to maturity. Vinville says the asset class acts as a diversifier for equities and bonds.

Vinville aims to exploit the “sweet spot” achieved by some bonds, where a convertible increases in value more if the share price moves upwards than it would decrease if the share price falls.

He takes a bottom-up approach to portfolio construction and held 41 securities at the end of last week.

Holdings will not be converted to equities unless there is a corporate action, and Vinville adds that he takes a long-term approach to investment.

According to M&G, the £470m life fund mandate run by Vinville returned 14.5% a year over the three years to June 30.

Global Convertibles has a minimum investment of £1,000. The initial charge is 4%, with an annual management fee of 1.5%.

The portfolio has been seeded with £50m from the Prudential life fund. Currency exposure will not be hedged back to sterling.