2023 | 2022 | 2021 | 2020 | 2019 | 2018 | 2017 | 2016 | 2015 | 2014 | |
---|---|---|---|---|---|---|---|---|---|---|
Fund (EUR S-H Acc) | 6.4 | 16.4 | -4.1 | 6.1 | 11.0 | -10.3 | 7.7 | 8.9 | 1.4 | 10.0 |
Benchmark * | 7.4 | 4.0 | 3.4 | 3.6 | 3.6 | 3.6 | 3.6 | 3.7 | 4.0 | 4.2 |
Multi-asset
4 min read 10 Jun 24
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 and you may get back less than you originally invested. There is no guarantee that the fund will achieve its objective and you may get back less than you originally invested. Where any performance is mentioned, please note that past performance is not a guide to future performance.
Philosophy and source of edge
The M&G (Lux) Episode Macro Fund seeks to generate returns by identifying instances when asset prices have moved away from fundamental value, as a result of human emotion. This is based on a belief that these instances have a high likelihood of correcting over the medium term due to the short-term nature of behavioural influences.
The fund will form a predisposition to be long or short of particular assets based on valuation signals and then will engage in tactical exposures (normally in a contrarian fashion) in response to periods of excess volatility (or ‘episodes’).
Flexibility and universe
Positions are taken primarily at the index level via liquid derivative instruments where available, such as futures, forwards and CDX/CDS (for credit) contracts, and occasionally through ETFs and baskets. The strategy can invest flexibly (both long and short) and is focused on directional and relative value bets across all investible asset classes, offering a genuine liquid alternative, in our view.
Please see a link to the fund questionnaire that provides more details on the investment philosophy and strategy here
Absolute investment objective
The fund aims to provide a total return of cash +4-8% a year over any five-year period.
In our view, the strategy has delivered on its stated investment objective since inception and most investment horizons (exhibit 1).
Past performance is not a guide to future performance
Performance data does not take account of the commissions and costs that may incur on the issue and redemption of units.
2023 | 2022 | 2021 | 2020 | 2019 | 2018 | 2017 | 2016 | 2015 | 2014 | |
---|---|---|---|---|---|---|---|---|---|---|
Fund (EUR S-H Acc) | 6.4 | 16.4 | -4.1 | 6.1 | 11.0 | -10.3 | 7.7 | 8.9 | 1.4 | 10.0 |
Benchmark * | 7.4 | 4.0 | 3.4 | 3.6 | 3.6 | 3.6 | 3.6 | 3.7 | 4.0 | 4.2 |
The fund can perform well:
The fund is likely to do less well:
However we believe the volatility profile of the strategy itself has been well contained over longer periods, with delivered volatility of the strategy measuring in the high single digits across longer time horizons. These elements in our view, have resulted in the strategy delivering superior risk-adjusted returns than both equities and bonds over the longer term (exhibit 2).
In addition to the strategy’s compelling returns, we believe the nature of the return delivery and correlation characteristics vs the major asset classes add to the attractiveness of the strategy as part of a broader portfolio.
In the life of the UCITS vehicle, the strategy has shown modest positive equity correlation, and close to zero correlation to global bonds.
Since the inception of the strategy in 1999, the portfolio has displayed both long and short exposure to major asset classes.
The strategy’s uncommon approach and philosophy means that it has also delivered returns uncorrelated with other alternative investments, and within the macro space.
Since the fund often seeks to capture tactical opportunities in a contrarian fashion, it can periodically behave differently to other macro strategies that have an emphasis on trending behaviour (such as CTAs) and/or economic forecasting based approaches.
Past performance is not a guide to future performance
The flexibility in allocating capital across various asset classes from both the long and the short end allows the fund to display varying sensitivities to bonds and equities in different market environments.
This has been the case over the past five years when it has generally exhibited positive beta to bonds and equities in months where they have risen and low / negative beta in weaker markets (exhibit 6).
Such varying exposure to market beta can be especially attractive to long only portfolios in phases of heightened volatility.
The past five years serve as a very good example of this. While a balanced 60-40 mix of global equities and bonds has generated a compelling annualized return of close to 8% over this period, the period has seen significant volatility in early 2020 and especially in 2022.
As illustrated in exhibit 7, adding exposure to M&G’s Episode Macro strategy through this period would have significantly reduced volatility and drawdowns, while preserving (indeed enhancing) returns over this period.
In two decades pre-COVID, traditional balanced multi asset funds stood out as providing attractive returns while benefitting from the negative correlation between bonds and equities when they were most needed.
The pandemic and its aftermath appear to have prompted a shift in this regime with consequences for future growth, inflation and real interest rate structures. The experience of 2022 highlighted the dangers of extrapolating historic patterns of returns across bonds and equities and a renewed for flexible strategies.
With consistent philosophy, repeatable (and liquid) process, and a successful track record dating back to the late 1990s, we believe the Episode Macro Strategy offers an opportunity to generate absolute returns while diversifying long only portfolios regardless of the regime.
The views expressed in this document should not be taken as a recommendation, advice or forecast. The information provided should not be considered a recommendation to purchase or sell any particular security
This is a marketing communication. Please refer to the Prospectus and the KID before making any final investment decision.
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.