An increasing need to stay flexible
At M&G Investments, we believe there are four key questions that investors should consider when investing in fixed income.
The value of investments will fluctuate, which cause prices to fall as well as rise and you may not get back the original amount you invested.
What does the rate cutting cycle mean?
As inflation pressures start to ease, expectations of cuts in interest rates have grown. Bond prices typically rise when interest rates fall. This means that we think bonds have become more attractive for investors seeking a consistent real income as inflationary pressures lessen.
How do bonds behave when growth slows?
The direction of bond markets is anything but straightforward when the economy slows down. Added to this, other uncertainties on a whole range of issues (the timing of any interest rates cuts, inflation data, even geopolitics) can make some types of bonds unattractive, while other areas of fixed income can appear appealing.
Is holding cash still a good option?
As interest rates fall, the return on cash investments decreases, resulting in lower yields and diminished income generation. This reduced income potential is particularly notable for those who rely on income from their investments to cover living expenses or achieve financial goals. With cash holdings, the income generated from interest or dividends may no longer provide the same level of sustenance or growth.
How do we respond to volatility?
Given the long experience of M&G’s fixed income team managing flexible bonds portfolios since 2006, we have experienced many different types of markets, economic environments and bumps in the road. We have argued for many years that the wide-ranging flexible nature of these strategies means it is possible to have a smoother investment journey.
M&G (Lux) Optimal Income Fund
Uncertain market environments require a dynamic and flexible approach to effectively capture optimal income streams. Our global, flexible, and diversified bond fund, with a proven track record of over 17 years, invests in government, investment-grade corporate, and high-yield bonds. As an active bond house, we continuously adjust our bond exposure based on the current economic cycle, leveraging our in-house expert team and robust valuation framework.
Flexible
Flexibility in different environments
Global
Diversified across sectors and issuers
Active yet simple
Actively managed, combining macroeconomic views and bottom-up security selection
Outstanding
Award winning fund with consistent long term performance
"This is the most flexible bond strategy I manage. It allows me the freedom to search out the most attractive income streams across a range of fixed income assets in order to optimise performance throughout the economic cycle."
Richard Woolnough
Fund Manager
Stay flexible with Optimal Income team
Led by our two portfolio managers, who bring an average of 28 years of experience, we are supported by numerous investment professionals and one of Europe’s largest credit analyst teams. This larger and more experienced team has enhanced our ability to seize a growing number of global opportunities.
M&G (Lux) Optimal Income Fund’s Portfolio Managers
Richard Woolnough
Fund Manager
- Joined M&G in January 2004 from Old Mutual.
- Richard is the fund manager of the M&G Corporate Bond strategy since February 2004 and M&G Strategic Corporate Bond strategy since launch in February 2004.
- He is also the fund manager of M&G Optimal Income strategy since launch in December 2006.
- He has 30 years experience in fixed income markets.
Stefan Isaacs
Deputy CIO, Public Fixed Income
- Stefan Isaacs is Deputy CIO of Public Fixed Income and Head of M&G's Wholesale Fixed Income business.
- He joined M&G as a graduate in 2001 and was subsequently promoted to corporate bond dealer specialising in high yield bonds and euro denominated credit.
- He was appointed lead fund manager of the M&G European Corporate Bond strategy in April 2007 and co-fund manager of the Optimal Income strategies since their inception in 2007. He is also lead fund manager on the Global High Yield Bond Strategy, and is co-fund manager on the Global Floating Rate High Yield and Sustainable Optimal Income strategies.
- Since 2010, Stefan has managed a number of high yield and ESG HY bond strategies in London and in Luxembourg. Stefan graduated BA (hons) International Business from Manchester Metropolitan University.
Source: M&G Investments, 28 February 2025. *This strategy originally launched on 8 December 2006 as a UK-authorised OEIC, named M&G Optimal Income Fund, run by the same fund managers, applying the same investment strategy.
Key risks associated with M&G (Lux) Optimal Income Fund
- 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. There is no guarantee that the fund will achieve its objective and you may get back less than you originally invested.
- Investments in bonds are affected by interest rates, inflation and credit ratings. It is possible that bond issuers will not pay interest or return the capital. All of these events can reduce the value of bonds held by the fund.
- The fund is exposed to different currencies. Derivatives are used to minimise, but may not always eliminate, the impact of movements in currency exchange rates.
- The fund may use derivatives to profit from an expected rise or fall in the value of an asset. Should the asset’s value vary in an unexpected way, the fund will incur a loss. The fund’s use of derivatives may be extensive and exceed the value of its assets (leverage). This has the effect of magnifying the size of losses and gains, resulting in greater fluctuations in the value of the fund.
- Please note, investing in this fund means acquiring units or shares in a fund, and not in a given underlying asset such as building or shares of a company, as these are only the underlying assets owned by the fund.