M&G Episode Balanced swaps strategic bonds for convertibles fund

M&G’s Juan Nevado and Tony Finding have sold out of their position in the M&G Optimal Income fund to add exposure to Portuguese government bonds and convertibles.

The managers disposed of the £335m M&G Episode Balanced fund’s holding in Richard Woolnough’s £15.6bn strategic bond fund in May, selling their 3.5 per cent allocation to the portfolio to pursue “better opportunities elsewhere”.

Nevado and Finding then allocated 1 per cent of their fund to Léonard Vinville’s £990.6m M&G Global Convertibles fund, with another 2.5 per cent going into Portuguese 10-year government bonds, where they “like the yield on offer”.

The M&G Global Convertibles fund, which invests in convertible bonds or debt issued by companies that can be converted into shares, is ranked first quartile over one year to 26 June, second quartile over three years and first quartile over five years.

It returned 4.1 per cent in May, outperforming the convertible bonds market as a whole, despite the sell-off that struck after speculation rose that the US Federal Reserve could start to ease its $85bn-a-month bond-buying programme.

Vinville says: “The fund demonstrated its good asymmetric profile; participating well when share prices were rallying and holding up better as equities fell back. Returns were mainly driven by successful stock selection, particularly in the US.”

Hargreaves Lansdown senior investment manager Adrian Lowcock says M&G has a strong bond franchise, meaning Nevado and Finding are still benefiting from the same team and expertise despite the fund switch.

He says: “What they are doing is saying they don’t want to play exposure in the bond market – they want some sort of presence through an asset with some equity-like performance.”