Investment update and outlook: M&G Optimal Income Fund

15 min read 21 Jul 22

Please find the latest investment update and outlook for the M&G Optimal Income Fund:

Key takeaways

  • It has been a volatile first half of the year for markets and fixed income asset classes have produced a negative return.
  • Rising inflation and international events have driven uncertainty and a diminished appetite for bonds.
  • Based on our macro view and where valuations are, we believe the fund can benefit from tighter credit spreads and a steepening of the yield curve.
  • Year-to-date, the fund has generated a negative return driven by wider spreads and rising government bond yields. The fund’s lower duration exposure and its exposure to value stocks was supportive in certain parts of the review period.
  • Duration is currently at around 5.1 years – the highest level in over 10 years. Most of the duration comes from the short and mid part of the curve while we retain a negative duration at the longer end.

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By Richard Woolnough

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