M&G Global High Yield Bond’s long-standing managers Stefan Isaacs and James Tomlins take a hands-on approach to this strategy, using their experience and the firm’s strong analyst bench to good effect.
The strategy retains its Morningstar Analyst Rating of Bronze. Stefan Isaacs took over the strategy's reins from Jim Leaviss in October 2010, having served as deputy manager since August 2007. He joined M&G in 2001 and has managed M&G European Corporate Bond since 2007.
High-yield specialist James Tomlins, who brings more than 14 years' sector experience, joined Isaacs at the helm in January 2014, having been deputy manager on the strategy since December 2011. We believe Tomlins' bottom-up stock selection appropriately complements Isaacs' focus on the topdown elements, such as regional and sector allocations, and, to a lesser extent, duration. The duo employs a high-conviction, benchmark-unconstrained approach that lays heavy emphasis on bottom-up fundamental analysis. M&G/Prudential's 50-plus credit analysts provide them the analytical resources to cover a large part of the global high-yield universe.
Topdown views generated by the portfolio managers are also implemented through sector positioning and geographic allocation, though typically all foreign-currency exposure is hedged back to sterling. The strategy has nevertheless become more global; exposure to the United States increased from roughly 20% in mid-2012 to 50% as at December 2018. An overweighting in financials, particularly banks, has been a key position for the past few years.
Cognisant of the (il)liquidity concerns in the high-yield space, the managers also maintain a liquidity buffer, which includes cash and government bonds, that usually exceeds 5% of assets. This is paired with a long credit beta derivative exposure through crossover indexes to provide market exposure and minimise cash drag. Notwithstanding the occasional defaults over the years, the managers have outperformed the global high-yield bond-GBP hedged Morningstar Category, though with a higher volatility and maximum drawdown. That said, we retain our belief that their relevant experience combined with M&G's strong analyst bench make this a solid choice.
