e-fundresearch.com: What is the current size of the fund?
Richard Woolnough: €21,705.8 million
e-fundresearch.com: Do you also manage other funds or mandates?
Richard Woolnough: Yes, the M&G Strategic Corporate Bond Fund and the M&G Corporate Bond Fund.
e-fundresearch.com: What is the total amount of assets you manage currently?
Richard Woolnough: €34,292.4 million
e-fundresearch.com: How long have you been in the business as a fund manager?
Richard Woolnough: I began my career at Lloyds Merchant Bank in 1985, moving to Italian insurer Assicurazioni Generali two years later, followed by SG Warburg. In 1995, I became a fund manager at Old Mutual before joining M&G in 2004.
e-fundresearch.com: What are the main steps in your investment process and in which area is your competitive edge to add value to investors?
Richard Woolnough: Firstly I form a macroeconomic overview for the fund based on my assessment of the likely direction of economic growth, inflation and interest rates within different economies. These top-down views, along with bottom-up factors, such as the level of credit spreads and the outlook for default rates, inform my opinion regarding where the relative value lies among the various fixed interest asset classes.
In light of this analysis, I then decide the asset allocation for the fund – for example, whether I want to be invested in government bonds, investment grade or high yield. Depending on my outlook for interest rates I will decide where I want to be positioned on the yield curve and whether I want to achieve this positioning through physical assets or by using derivatives, such as bond or interest rate futures. The fund’s sector positioning is also influenced by my macroeconomic views. I may, for instance, increase or decrease the fund’s exposure to cyclical sectors in response to my judgement of the health of the economy and hence the outlook for corporate profitability.
The M&G Optimal Income Fund is a fully flexible strategic bond fund that has the freedom to invest across all of the fixed interest asset classes, allowing me to express views on duration and credit without constraints. I can even invest up to 20% of the fund in equities in instances where I consider the shares of a company to be more attractively priced than its bonds.
e-fundresearch.com: Which benchmark is most relevant and how should investors compare the fund vs. benchmarks or peer groups?
Richard Woolnough: As the fund takes an unconstrained approach, performance should be compared to the fund’s comparative Morningstar EUR Cautious Allocation – Global sector.
e-fundresearch.com: Which performance did you achieve for the fund YTD and over the past five calendar years in absolute terms and relative to relevant benchmark or other reference indices?
Richard Woolnough: The fund has returned 0.49% year-to-date vs. a sector return of 0.02% (as at 31 January 2014). Over the past five calendar years the fund has produced an annualized return of 13.5% vs. a sector return of 5.0% (as at 31 December 2013).
e-fundresearch.com: Thank you!