M&G’s Woolnough boosts high yield exposure after sell-off


Richard Woolnough has lifted the M&G Optimal Income fund’s high yield position after taking advantage of falling prices in the space.

During June, the £15.2bn strategic bond fund’s net exposure to high yield rose to almost 31 per cent, up from around 24 per cent at the end of May, as the manager used the month’s sell-off as a buying opportunity.

The fund’s latest client update says: “Having reduced his allocation earlier in the year, Richard now believes the high yield segment offers better value and he increased his positions in both the North American HY CDX and the Markit iTraxx Crossover index.”

Woolnough also increased his high yield exposure by purchasing individual names for the portfolio, including new issues from British car association The AA, chocolate maker Barry Callebaut and Icelandic food manufacturer Bakkavor.

M&G Optimal Income’s duration was lifted during June after the large moves seen in government bond yields. The manager took duration from 2.4 years to 3.1 by the end of the month, with the bulk of this driven by purchases of five-year Treasury futures and slight reductions in shorts on 10-year gilt and Treasury futures.

In addition, Woolnough held the fund’s equity exposure at around 12 per cent. Holdings in Barclays Bank and France Telecom were topped up over the month, while others such as Johnson & Johnson and Sanofi were reduced.

M&G Optimal Income’s cumulative performance to 22 July 2013

M&G Optimal Income 0.90% 2.92% 9.49% 29.31% 73.43%
-1.81% 0.20% 6.53% 21.31% 38.76%
2.76% 2.72% 2.79% 6.59% 24.98%
  4 / 74 4 / 68 17 / 68 6 / 60 3 / 49
1 1 1 1 1

Source: FE Analytics