Of the 53 funds included in the M&G value assessment for the year ending 31 March 2022, two were handed a failing grade.
It is the third assessment of value report from M&G since the Financial Conduct Authority mandated that firms provide a yearly update of whether their funds are delivering for investors.
Each fund is judged against seven criteria: quality of service, investment performance, AFM cost, economies of scale, comparable market rates, comparable service and share classes.
Each criteria is given a score: one for outstanding, two for good, three for satisfactory, four for must improve, and five for unsatisfactory.
The vast majority secured an overall two or a three rating, showing good outcomes for investors. But two funds were lumped with an unsatisfactory score: M&G Absolute Return Bond and M&G Recovery.
The £16.7m absolute return strategy has been co-managed by Jim Leaviss (pictured) and Wolfgang Bauer since December 2016.
It scored well when it came to quality of service and economies of scale, with two of its four share classes even scoring top marks for comparable market rates. But it was red marks across the board when it came to performance, which ultimately dragged its overall score down to five/unsatisfactory.
M&G said it is conducting a “thorough review of the fund’s performance and strategy”.
M&G Recovery fails to turn fortunes around
Investment performance was also the millstone around the neck of the M&G Recovery fund. All five share classes fell short on this criterion, resulting in unsatisfactory scores across the board.
The £1.2bn fund dates to 1969 and has been managed by head of UK equities Michael Stiasny since December 2020, who had served deputy on the strategy since 2011.
Solidly fourth quartile over three and five years, it experienced a brief uplift to third quartile over one year, but appears to have returned to the bottom rung since. The fund has not made a return in over five years, nor beaten the IA UK All Companies sector.
“Once again, the fund has failed to achieve its five-year objective, despite a recent change of fund manager. However, we believe investors benefit from the fund’s economies of scale and annual charges that are found to be lower than most competitors,” M&G added.
The M&G Recovery fund “remains under close review by [Fabiana Fedeli] the chief investment officer of equities and multi asset”.
Brief shining light
While two of M&G’s funds failed to deliver value for investors during the year to the end of March, one was recognised for its strong investment performance.
The £116.4m M&G Japan Smaller Companies fund has been managed by Carl Vine since he joined the company in 2019. He is supported by deputy manager Dave Perrett. The pair are co-heads of Asian investment.
The fund is comfortably top quartile over the standard time frames and has consistently outperformed the IA Japanese Smaller Companies. Over three years, the fund delivered 38.7% against 7.4% from its benchmark. Over one year that fell back considerably to 4.3%, but the IA Japanese Smaller Companies sector failed to make a return, recording instead a loss of 8.1% over one year.