Nearly two-thirds of M&G's funds underperforming

Nearly two-thirds of M&G's funds underperforming

Nearly two-thirds of M&G’s funds require an improvement in performance, the fund house has said.

In its 190-page assessment of value report, released last week, the company said 60.8 per cent of its funds must improve (measured by total assets under management), and 4.4 per cent are unsatisfactory. 

The remaining 34.8 per cent delivered value for M&G’s clients in the year to March 31.

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This is an increase on the 52.9 per cent registered as in need of improvement in 2021, with no funds being rated as unsatisfactory. 

M&G highlighted two funds that have not met their investment objectives, the absolute return bond fund and recovery fund.

The recovery fund is the larger of the two, with £1.2bn, and aims to deliver a return higher than the FTSE all share index over a five year period.

The fund has underperformed its benchmark by nearly 6 percentage points, depending on the share class.

The £16.7mn absolute return bond fund aims to return 2.5 per cent over the sterling overnight interbank average rate, which over the past three years has been 2.9 per cent. 

The fund’s sterling A class, its best performing, saw a return of 1.2 per cent, and its best performing, sterling L, saw 1.6 per cent. 

Since then, the manager and investment approach of the fund have changed, and M&G said it is “disappointed” that despite these changes the fund has not delivered improved performance. 

On the other end of the scale, M&G said the Japan smaller companies fund has offered “outstanding value” to investors, largely due to “exceptional” investment performance. 

The fund has outperformed its benchmark, the Russell/Nomura Mid-Small Cap Index, by more than 8 percentage points in the three years to March 31. 

M&G said it will continue to monitor all funds as part of its ongoing oversight to ensure customers receive value.