Rising rate protection is still a potential diversifier

15 min read 3 Oct 22

Please find the latest fund update covering the M&G (Lux) Global Floating Rate High Yield Fund:

Key takeaways

  • Floating rate notes (FRNs) can potentially benefit from further increases in central bank interest rates due to their variable coupons, or regular interest rate payments, while protecting investors’ capital, in our view.
  • Credit spreads – the difference between government and corporate bond yields, measuring investors’ appetite for risk – appear to be pricing in a hard landing despite consensus expectations of mild recessions in major economies; we believe this creates potential for higher prospective returns.
  • Active management can help to mitigate portfolio risks in a recessionary environment, by reducing or avoiding exposure to cyclical sectors and distressed issuers.

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By M&G Wholesale Public Fixed Income team

The value of investments will fluctuate, which will cause prices to fall as well as rise and you may not get back the original amount you invested. Past performance is not a guide to future performance.

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