Investment update and outlook: M&G (Lux) Optimal Income Fund
15 min read21 Jul 22
By Richard Woolnough
Please find the latest investment update and outlook for the M&G (Lux) Optimal Income Fund:
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. However, the fund outperformed its benchmark year to date mainly thanks to its lower duration exposure and its exposure to value stocks.
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.