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Audience

Public debt

Public debt investments offer a stable income both on their own and in combination with our other fixed income offerings.

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For further information about our investment opportunities in public debt.

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Our expertise

We have over 40 years of experience in sourcing attractively priced public debt assets, including corporate and government bonds as well as alternative credit such as asset-backed securities.

Our government bond products have allowed investors to benefit from volatility in the conventional gilt and index-linked gilts markets, resulting in strong performances across our product range.

In the sterling and euro corporate markets, our managers invest across investment grade corporate bonds, high-yield bonds, asset-backed securities, covered bonds, sovereign debt, supranational debt and agency debt.

Our fund managers are supported by what we believe to be one of the largest credit analyst teams in Europe, and a dedicated restructuring unit. These teams have assisted to deliver consistent performance which helped mitigate the effect of market conditions such as the global financial crisis of 2008 and the current European sovereign debt crisis. 

Our products are available as both Institutional pooled funds and segregated mandates.

The value of investments will fluctuate, which will cause prices to fall as well as rise and investors may not get back the original amount they invested.

Where past performance is referenced, please note that this is not a guide to future performance.

Government bonds

We believe we are one of the UK’s largest investors in conventional and inflation-linked UK government bonds, holding €39bn* and over €9bn* respectively.

Our highly experienced gilt fund management team uses fundamental research to identify attractively priced securities in these markets. Their value-based strategies have the potential to work with all market conditions but can be particularly effective during periods of heightened volatility. Since the height of the financial crisis of 2008, our pooled gilt strategies have delivered returns above their respective benchmarks.

*As at 30 June 2018.

Corporate bonds

We manage a range of segregated and pooled corporate bond products in euro or sterling for our institutional clients.

Our credit funds invest primarily in pan-European debt and across the ratings spectrum. We invest in:

  • High-yield and investment grade bonds
  • Asset-backed securities and covered bonds
  • Sovereign, supranational and agency debt

Asset-backed securities (ABS)

Asset-backed securities (ABS) are securities whose value and income payments come from, and are backed by, a specified pool of underlying assets. Similar to equities and corporate bonds, ABS can cover a wide range of underlying asset classes.

The case for European ABS

Since 2008, European ABS have consistently traded at higher spread levels than unsecured bank bonds, while offering steady floating-rate returns and full security over a pool of identifiable and tangible assets.

This produces a market anomaly of being paid more to hold on to a more secure asset. This anomaly arises for a several reasons, but most importantly it stems from the post-crisis regulatory environment in Europe, which makes ABS unattractive to own for investors, such as insurance companies, that would previously have bought them.

UK and European ABS have the potential to offer solid returns and have a very robust credit performance. Default rates have been very low both pre and post-the financial crisis – as the European Commission highlighted in September 2015, since the start of the crisis, default rates on AAA-rated European residential mortgage-backed securities (RMBS) have not risen above 0.1%.

Our ABS credit analysts have extensively modelled UK and European ABS and believe they can withstand a huge amount of macro-economic pain before the bonds suffer even a penny of losses.

Overall, ABS can present an attractive investment proposition with the flexibility to allow investors to tailor their portfolios to a specific risk or return appetite.

ABS can offer investors:

  • a premium over other similarly rated fixed income asset classes
  • floating rate returns which protect against interest rate rises
  • security against ring-fenced assets
  • a strong credit track record

Total return credit investing

Investing in a total return strategy allows investors to maintain a permanent allocation to fixed income, but by assigning asset allocation decision making to a portfolio manager, investors benefit from a swift and well researched response to changing and developing markets. Total return portfolios are not managed against a reference benchmark and aim to deliver positive absolute returns.

Our approach to total return investing provides investors with access to M&G’s extensive public and private debt resources in a solution that combines:

  • Flexibility to invest across many debt asset classes
  • Flexibility to asset allocate between debt asset classes and sectors
  • Flexibility to invest across all ratings bands or through the debt part of the capital structure
  • Extensive management of interest rate risk

Our total return strategy has delivered positive absolute returns on an annualised basis since its inception in April 2007.

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