M&G (Lux) Floating Rate High Yield Solution

Objective and investment policy

Objective

The fund aims to provide a competitive global high yield bond market exposure whilst limiting interest rate risk. Fund performance will be measured against a global high yield composite index* over any five-year period. The fund is actively managed and the index is a point of reference against which the performance of the fund may be measured.

Investment policy and strategy

*The composite index consists of 2/3 the Markit CDX® North American High Yield Index and 1/3 the iTraxx Crossover Index.

Core investment: At least 70% of the fund is invested synthetically in floating rate high yield bonds. This exposure is achieved by combining high yield credit default swap (CDS) indices with government floating rate bonds (rated A or above by Standard & Poor’s), from anywhere in the world, or cash. A high yield CDS index is a derivative instrument that gives investors indirect exposure to a basket of high yield bonds which are easily traded and have low interest rate risk. Currency exposures within the fund will be typically in US dollars. Derivatives may be used to offset the impact of currency exposures arising from the fund’s non-USD investments.

Other investment: The fund may also invest in other assets, including government bonds, currencies, cash or assets that can be turned quickly into cash, other debt securities, warrants and other funds.

Use of derivatives: Derivatives are used for investment purposes and to allow the fund to gain exposure to investments exceeding the fund’s value, thus increasing potential returns (or losses).

Derivatives may also be used to manage risks and reduce costs. For more information on the types derivatives used, please refer to the Prospectus, which can be found by visiting www.mandg.lu.

Strategy in brief: The fund is globally diversified and seeks to provide exposure to a broad range of high yield bond issuers across different sectors. The investment manager has the flexibility to adjust the fund’s credit exposure and regional allocation depending on current market valuations and the macroeconomic environment, including the likely path of economic growth, inflation and interest rates.

Glossary terms

Bonds: Loans to governments and companies that pay interest. Derivatives: Financial contracts whose value is derived from other assets. Floating rate bonds: A type of bond whose interest payments, or coupons, are adjusted in line with movements in interest rates. High yield bonds: Bonds issued by companies considered to be riskier and therefore generally paying a higher level of interest. Warrants: Financial contracts which allow the fund manager to buy stocks for a fixed price until a certain date.

Risks associated with the fund

The value and income from the fund's assets will go down as well as up. This will cause the value of your investment to fall as well as rise. There is no guarantee that the fund will achieve its objective and you may get back less than you originally invested.

The fund may use derivatives to profit from an expected rise or fall in the value of an asset. Should the asset’s value vary in an unexpected way, the fund will incur a loss. The fund’s use of derivatives may be extensive and exceed the value of its assets (leverage). This has the effect of magnifying the size of losses and gains, resulting in greater fluctuations in the value of the fund.

Investments in bonds are affected by interest rates, inflation and credit ratings. It is possible that bond issuers will not pay interest or return the capital. All of these events can reduce the value of bonds held by the fund.

High yield bonds usually carry greater risk that the bond issuers may not be able to pay interest or return the capital.

The hedging process seeks to minimise, but cannot eliminate, the effect of movements in exchange rates on the performance of the hedged share class. Hedging also limits the ability to gain from favourable movements in exchange rates.

In exceptional circumstances where assets cannot be fairly valued, or have to be sold at a large discount to raise cash, we may temporarily suspend the fund in the best interest of all investors.

The fund could lose money if a counterparty with which it does business becomes unwilling or unable to repay money owed to the fund.

Further details of the risks that apply to the fund can be found in the fund's Prospectus.

Other information

The Fund allows for the extensive use of derivatives.

Fund Team

James Tomlins

James Tomlins - Fund manager

James Tomlins is fund manager of the M&G (Lux) Global Floating Rate High Yield Fund and co-manager of the M&G (Lux) Global High Yield Bond Fund, M&G (Lux) Floating Rate High Yield Solution, M&G (Lux) Global High Yield ESG Bond Fund and M&G (Lux) Global High Yield Bond 2023 Fund since launch. James is a specialist in high yield credit with more than 10 years’ experience in this sector. He was previously an analyst and then a fund manager at Cazenove Capital Management. Before Cazenove, James was at KBC Alternative Investment Management; in the three years prior to that, he worked at Merrill Lynch Investment Managers. James is a CFA charterholder and graduated with an MA in history and PgDip in economics from the University of Cambridge.

 Team member biography
Stefan Isaacs

Stefan Isaacs - Fund manager

Stefan Isaacs is Deputy Head of Retail Fixed Interest for M&G's mutual fund range. He joined M&G as a graduate in 2001 and was subsequently promoted to corporate bond dealer specialising in high yield bonds and euro-denominated credit. Stefan joined the fund management team in 2006 and was appointed fund manager of the M&G European Corporate Bond Fund in April 2007 and the M&G Global High Yield Bond Fund in October 2010. He is co-fund manager of the M&G (Lux) Floating Rate High Yield Solution, launched in August 2017 and the M&G (Lux) Global High Yield ESG Bond Fund, launched in October 2017. Stefan is also deputy fund manager of the M&G Optimal Income Fund, the M&G European High Yield Fund and the M&G Global Floating Rate High Yield Fund.

 Team member biography

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