- 28% of M&G funds have consistently ranked among the top performing funds in their sectors over the past 1, 3 & 5 years.
- The largest M&G fund is the Global Themes fund with £2.2 billion of assets under management. This fund is also one of the top performing funds in the Global sector.
- The recently launched M&G Sustainable Multi Asset fund range has endured a difficult period with each of the 3 funds ranking in the bottom half of their sector for performance over the past 12 months.
- The M&G Global Listed Infrastructure fund ranked 1st in its sector for performance over 5 years with returns of 62.64% comfortably better than the 32.32% sector average for the period.
M&G manages assets of over £308 billion in equities, multi-asset, fixed income, real estate and cash for clients in the UK, Europe and Asia. Despite their global size and wide range of fund choice, M&G funds are often overlooked by investors and advisers in the UK - often for funds that have delivered lower levels of performance.
M&G ranked an impressive 3rd in our fund manager league for fund performance and in this report, we analyse the performance of each of their 53 funds alongside all other competing funds within the same sectors and provide them with an overall performance rating between 1 and 5 stars depending on how they rank within their relevant Investment Association sectors.
M&G Performance Summary
Our analysis of the 53 funds managed by M&G identified that 49% received a poor performing 1 or 2 star rating with the majority (31%) receiving a modest 3 star rating. The remaining 37 funds had consistently outperformed the majority of their peers over the 1, 3 & 5 year periods analysed and received a very impressive 4 or 5 star rating.
The Best M&G Funds
15 of the 53 funds analysed received a 4 or 5 star performance rating, which ranked them 3rd from an analysis of 74 fund managers in our most recent fund manager league table.
When assessing the best M&G funds for performance we can see that their management team have shown particular expertise in Japanese Equities, Sterling Bonds and Global Equities.
M&G Japan Fund
The M&G Japan fund was one of their top performing funds. The fund’s manager invests at least 80% of the fund directly in the shares of companies (usually less than 50), across any sector and of any size, that are based, or do most of their business, in Japan. This fund has consistently ranked among the best funds in the Japan sector in the long term and during periods of high volatility and market uncertainty. Over the past 1, 3 & 5 years the M&G Japan fund returned growth of 6.37%, 25.24% and 19.01%, each of which were well above the sector averages of -8.48%, 5.5% and 10.06%.
M&G Japanese Smaller Companies Fund
The M&G Japanese Smaller Companies Fund aims to provide a higher total return (the combination of capital growth and income), net of the Ongoing Charge Figure, than that of the Russell/Nomura Mid-Small Cap Index over any five-year period. The fund has consistently topped the Japanese Smaller Companies sector for growth and over the 1, 3 & 5 year periods analysed it returned growth of 9.20%, 46.13% and 33.74%. In comparison, the sector only averaged -7.17%, 6.33% and 10.76% respectively.
M&G Global Themes Fund
The fund manager aims to identify themes arising from long-term structural shifts, changes or trends. Stocks that can benefit from these themes are then selected on the basis of their quality, growth and valuation. Themes are identified through the analysis of global macroeconomics, demographics, government policies and spending, and technological innovation, among other considerations. The bottom-up stock selection process is designed to identify well-run companies which can benefit from those themes and which are trading on attractive valuations with good, sustainable growth prospects.
The Global Themes fund has shown its quality over the short and long term with returns consistently above the sector average and among the top performers of the entire Global sector. Over the past 3 years the fund outperformed 93% of all other funds in the Global sector with returns of 36.64%.
M&G Short Dated Corporate Bond
The M&G Short Dated Corporate Bond fund is diversified across a range of investment grade debt securities from a variety of sectors and geographies. The fund’s investment approach is based on the principle that returns from corporate bond markets are driven by a combination of macroeconomic, asset class, sector, geographic and stock-level factors.
As different factors dominate returns at different stages of the economic cycle, the fund manager applies a flexible investment approach, changing the blend of duration and credit exposure in the portfolio to weight them appropriately.
The fund manager also maintains a low duration profile through the fund's bias towards short-dated corporate bonds, in order to limit the effect of interest rate movements on the fund’s capital value. Individual credit selection is carried out with the assistance of an in-house team of credit analysts to complement the fund manager’s views.
The fund is classified within the Sterling Corporate Bond sector, which is a sector that has faced tough challenges over the past 5 years with market conditions not conducive to corporate bonds. However, despite the sector averaging losses over each of the 1, 3 & 5 year periods analysed, the M&G Short Dated Corporate Bond ranked 1st out of 94 funds in the sector for performance over the past year and was one of only a small selection of funds in the sector to return growth over 3 & 5 years.
Underperforming M&G Funds
As this report identifies, a large proportion of M&G funds have performed well, but like all fund management firms they also have a proportion of funds that have struggled to maintain a competitive level of performance. From the 53 funds analysed 22 received a poor 1 or 2 star performance rating.
M&G Recovery Fund
Recovery investing focuses on companies that have experienced difficulties but may have the potential to deliver returns for shareholders through their turnaround over the long term. The fund looks to benefit from the market’s inefficiency in valuing companies going through short-term challenges. This enables the fund manager to identify companies whose long-term prospects may have been under-appreciated by the market. When analysing a company, the fund manager focuses on three key factors: people, strategy and cashflow.
Although the funds strategy is a long term one and based entirely on investing in companies who have struggled but have the potential to deliver strong growth through their recovery, it has yet to deliver on its objectives. Over the past 5 years the fund ranked 222nd out of 228 funds in the sector for performance with negative growth of -11.94%. Although the funds sector ranking has improved over the past year its returns were still below average.
M&G Property Portfolio
The M&G Property Portfolio aims to maximise long-term total return through direct investment in commercial property. The fund is diversified across different property sectors (such as retail, offices and industrial). The funds management team do this by reviewing the structural and portfolio risk implications of holding various assets within the fund and when acquiring new assets for the fund. In researching properties and therefore the associated risk, the manager considers location, property type, rent review and lease expiry pattern, tenant, industry sector, tenure, lease covenants and physical and environmental factors.
Over 3 & 5 years the fund has been the worst in its sector with negative returns of -7.91% and -10.35%. The fund manager has been attempting to lower the risk of the fund and improve its performance by selling certain retail properties. Whilst over the past year this has helped improve the funds sector ranking it has still performed below the sector average.
M&G North American Value Fund
The M&G North American Value funds investment approach identifies shares of North American companies which, in the fund manager’s opinion at the time of investment, are undervalued. When analysing companies, the fund manager seeks to identify companies that are mispriced, while trying to avoid companies that are cheap for a reason and whose share prices are unlikely to improve over time. The fund has underperformed over a 5 year period with returns of 49.12% considerably below the sector average of 67.17% for the period. However, it is worth noting that the fund's performance has steadily improved and over the past 1 year it returned growth of 10.88% even though the sector averaged negative growth of -6.63% during the same period.
M&G Fund Charges
In the table below we detail each fund's annual charge which is the total fee paid to M&G to cover all aspects of operating the fund for one year. We also analysed the averaged annual charge for each funds sector to gain an understanding as to how competitively priced or not their funds are. As identified in the table, the cost of investing in MandG funds can vary between 0.97% and 0.25% for their ‘I’ variant of their funds.
M&G Planet Plus Funds
The M&G Planet+ range consists of funds that they have categorised as ESG Enhanced, Sustainable and Impact themed funds.
As a minimum, all funds in their Planet+ range exclude companies that are:
- involved in the controversial weapons industry
- deemed to be in breach of the United Nations Global Compact Principles on human rights, labour, the environment and anti-corruption
- involved in unconventional oil and gas extraction (such as oil sands and Arctic drilling)
- involved in tobacco (production and distribution)
- involved in adult entertainment (production and those deriving revenue from that business)
- providing gambling services
The M&G planet plus range is divided into two separate categories.
Impact Funds
Aim to invest in companies that deliver a measurable positive impact on the environment and/or society.
Sustainable Funds
Will allocate to investments that are expected to have a positive contribution to environmental and/or social objectives.
M&G Impact Funds
Impact funds target a measurable, positive impact for people and the planet, alongside achieving long-term financial returns. To do this they will:
- aim to invest in companies that have the explicit intention of addressing the world’s major social and environmental issues
- look for companies that deliver a meaningful and measurable positive impact, often framed against the UN Sustainable Development Goals (SDGs)
- report transparently on the impact that investments deliver
The M&G Climate Solutions Fund
The M&G Climate Solutions fund is designed to deliver both financial returns for investors and a positive impact for the planet. M&G aims to do this by investing in companies they believe can deliver solutions to the challenge of climate change and are well placed to grow within their chosen sector.
For their impact funds MandG focuses on three main impact areas – clean energy, green technology and the promotion of a circular economy. These three funds also adhere to the United Nations Sustainable Development Goals (SDGs), which are a universally recognised articulation of the most pressing challenges facing people and the planet.
As a relatively new offering to investors, M&G’s range of impact funds are young funds with limited experience and performance history, as such, there is little insight into how well the fund performs compared to other funds within the same sectors.
The M&G Climate Solutions fund launched in November 2020 and is classified within the IA Global sector. Since its launch it has struggled to match the Global sector average as its cumulative returns of 11.90% up to 1st December 2022 was below the Global sector average of 14.14% for the same period. But it is important to note that a large proportion of the funds in the Global sector do not follow distinct climate or impact related strategies and therefore have no limitations in the companies they invest in.
M&G Positive Impact Fund
The M&G Positive Impact fund invests in companies that have the explicit aim of addressing a range of societal and environmental issues the world is facing, while also giving equal importance to competitive, long-term investment returns. The fund focuses on six impact areas – three environmental and three social — in line with the United Nations Sustainable Development Goals (SDGs).
The SDGs are a universal call to action to end poverty, protect the planet and ensure that all people enjoy peace and prosperity. We invest in companies that aim to make a material, measurable, positive contribution towards these goals.
Similar to the M&G Climate Solutions fund, the Positive Impact fund is classified within the IA Global sector but it has a longer performance history and it has also performed better. Since its launch on 20th November 2018 up to 1st December 2022, the fund returned cumulative growth of 58.25%. In comparison, the sector average for this period was 44.80%.
M&G Better Health Solutions Fund
The fund stands apart from other health-focused global equities funds as it looks beyond the healthcare sector, to invest in companies that deliver better well-being too.
The fund embraces the UN Sustainable Development Goals (SDGs) framework and invests in companies that generally contribute most clearly to SDG 3: good health and well-being, but also;
- SDG 2: zero hunger
- SDG 6: clean water and sanitation
- SDG 8: decent work and economic growth
- SDG 11: sustainable cities and communities
- SDG 12: responsible consumption and production
The M&G Better Health Solutions fund launched in June 2021, and it aims to hold between 30 to 40 businesses from around the world, that will fall into their defined categories. Since its inception it has returned negative growth of -3.31% up to 1st December 2022, which was below the sector average of -0.78% for the period. Over the past 12 months the fund ranked 242nd out of 463 in the sector for performance with negative returns of -8.10%. However, with the exception of the first 5 months of the fund's history, it has only known market uncertainty and extreme volatility. Therefore to gain a true reflection of the funds quality we recommend that it is assessed over a longer period going forward.
M&G Sustainable Funds
In addition to their range of Impact funds, M&G also now offer 3 Sustainable funds. Although these funds share many similarities the M&G Sustainable fund range has a greater focus on ESG (environmental, social and governance) factors.
M&G Multi Asset Funds
For several years Multi Asset funds have been among the top sellers in the industry with more fund managers adding to their range in order to meet the growing demands of investors who continue to drive inflows into these convenient, risk rated solutions. Multi Asset Funds differ from traditional unit trust funds as they invest across a range of different asset classes instead of just one. As such, they can sometimes be used by investors as readymade portfolios that are already globally diversified and risk rated.
One of the biggest providers of multi asset funds in the UK is M&G, whose range of 9 multi asset funds are designed to appeal to 4 different types of investors.
- Growth
- Income
- Capital Preservation
- Sustainable Investing
Each of the 3 growth focused multi asset funds from M&G have consistently outperformed the sector average over the 1, 3 & 5 year periods analysed.
M&G Managed Growth Fund
The M&G Managed Growth fund was the top performing growth focused fund in their multi asset range. This fund has a diversified model and primarily has holdings in financial and technology companies in the U.S and the UK. The fund is currently responsible for managing £830 million on behalf of UK investors and as identified in our analysis it has consistently performed well within the Flexible Investment sector. Over the past 1, 3 & 5 years this 5 star rated fund returned growth of 2.93%, 22.03% and 29.55%, each of which were better than the sector average with the most recent 1 year performance better than 95% of the funds in the sector.
M&G Episode Allocation
The M&G Episode Allocation fund has a mid range dynamic planner risk rating of 5 out of 10. The fund is classified within the Mixed Investment 20-60% Shares sector and it currently manages £220 million on behalf of UK investors. Due to its lower risk strategy, the fund has a higher range of bonds than the Episode Growth and Managed Growth funds. The fund has struggled for competitive performance over the longer period with its 5 year returns of 5.86% below the 8.49% sector average but this performance has steadily improved and over the recent 12 months the fund outperformed 97% of the funds in its sector.
M&G Episode Growth Fund
The M&G Episode Growth fund currently manages £773 million and is classified within the Mixed Investment 40-85% Shares sector which contains some of the most popular multi asset funds on the market including the £15 Billion Vanguard LifeStrategy 60% Equity fund. Over the past 1 & 3 years the M&G Episode Growth fund returned -1.32%, and 15.06% which was comfortably above the sector average and better than the -9.37% and 7.84% returned by the hugely popular Vanguard LifeStrategy 60% Equity fund.
M&G Sustainable Multi Asset Range
The M&G Sustainable Multi Asset Funds are sustainable funds. They are designed to deliver both financial returns for investors and invest in companies driven by sustainability themed considerations, like the ongoing fight against air pollution, while at the same time meeting high environmental, social and governance (ESG) standards.
M&G Sustainable Multi Asset Cautious Fund
The M&G Sustainable Multi Asset Cautious Fund, has the lowest volatility limit of 9% (per annum; over a 5yr rolling period) and therefore has the lowest amount invested in assets more likely to be volatile. This means it has the lowest level of risk of the three funds, and lowest potential rewards.
M&G Sustainable Multi Asset Balanced Fund
The M&G Sustainable Multi Asset Balanced Fund has a volatility limit of 12% (per annum; over a 5yr rolling period) and has a more even spread invested across the main asset classes. Therefore the Balanced Fund is likely to be more volatile than their Cautious Fund but less volatile than their Growth Fund.
M&G Sustainable Multi Asset Growth Fund
TheM&G Sustainable Multi Asset Growth Fund has the highest volatility limit of 17% (per annum; over a 5yr rolling period) and therefore has the highest amount invested in assets more likely to be volatile. This means it has the highest level of risk of the three funds, and the highest potential rewards.
These 3 funds launched together on 8th December 2020 with the balanced fund proving to be the most popular among investors who have entrusted almost twice as much into this fund than the other 2. However, as our analysis shows, the performance of all 3 M&G Sustainable Multi Asset funds has been disappointing with each fund ranking among the worst performers in the IA Volatility Managed sector over the past year. Since their inception, only the Growth fund has managed to deliver positive returns. Between 8th December 2020 and 1st December 2022 this fund returned cumulative growth of 3.17%. In comparison, the Balanced fund returned negative growth of -2.13% and the Cautious fund returned -8.60%.
Why Multi Asset Funds Are Not Investment Portfolios
M&G provides a large range of multi-asset funds that are popular with investors but such funds have limitations that are not often considered. Although Multi Asset funds are effective in managing risk, when it comes to performance, the majority fail to deliver. In their own respective sectors they might rank highly but as an overall investment portfolio they lack depth and overall quality.
Investing requires a degree of flexibility which Multi asset funds lack because the majority of fund managers follow a restrictive approach of using a composition of their in-house funds to build their multi asset products, irrespective of whether these in-house funds are performing well or not, or if more suitable funds are available elsewhere.
Should investors wish to manage their own portfolios then multi asset funds could be regarded as a safe way to do so, but when it comes to optimising your portfolio for efficient growth, investing in multi asset funds will prove restrictive.
Our analysis identified below average returns for the majority of Multi Asset solutions with more suitable and better performing alternatives available.
Summary
As identified in our analysis, M&G have a large range of funds with consistently competitive performance, but like all other fund management brands they also have proportion of funds that have struggled. For investors, the key to efficiently meet investment objectives is by identifying and investing in high quality funds that are suitably weighted and diversified across different asset classes.
Whilst this analysis identifies some high quality M&G funds a mix of providers who specialise in different markets has proven to be the most efficient model for maximising portfolio efficiency.
