Fixed Income  

Bearish Europe view prompted curb on Woolnough funds

M&G Investments’ Richard Woolnough has said it was his bearish view on the situation in the eurozone that caused him to ask investors to slow their support for his two corporate bond funds.

Mr Woolnough told clients in 2012 that he thought it was in the interest of investors in his now £5.2bn Corporate Bond and £5bn Strategic Corporate Bond funds to “explore ways to slow down money and so control growth”.

But now the manager has explained why he took this stance in a client conference call.

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“We were among the top-performing funds and we had a view [the European Central Bank president] Mario Draghi’s policies would not work and that financials would become sub-investment grade,” he said.

“If that had happened the universe we could invest in would have shrunk and we would have been the fund of choice.

“Our view was not correct and the eurozone did not fall apart and so the market place has not shrunk as it would have done and our performance was not as strong because of our negative view on Europe.”

The group told Investment Adviser earlier this week that the “unprecedented action” it took in 2012, after the size of the funds swelled to massive proportions “looks like it has served its purpose”.

Mr Woolnough said he was now “more relaxed” about the eurozone adding the corporate bond market continued to grow in size.

“The funds are not on the same trajectory as they were,” he said. “It was a preventative measure and now we are more relaxed about things than we were.

“The funds are smaller and the universe [of bonds we can invest in] is bigger so the scenario is more stable.”