A defensive approach to high yield investing
The M&G (Lux) Global Floating Rate High Yield Fund provides access to a globally diversified portfolio of high yield floating rate notes (FRNs) issued by companies or governments from anywhere in the world and denominated in any currency.
At least 70% of the fund is invested in high yield FRNs, focusing on FRNs issued by companies with a low credit rating, which typically pay higher levels of interest to compensate investors for the greater risk of default.
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.
What are high yield FRNs?
FRNs are bonds which pay a variable rate of interest. The coupon is made up of two distinct components:
- A variable component, reset typically every three months, in line with a money market reference rate, such as LIBOR (or other rates that succeed LIBOR when its publication ceases)
- A fixed spread, which is the difference in yield between ‘risk-free’ government bonds and bonds issued by companies
High yield FRNs – designed to generate income without undue interest rate risk
How high yield floating rate notes work
Illustrative example: Providing an attractive income stream as interest rates rise
Source: M&G, 2022. For illustrative purposes only. *Floating rate coupon automatically adjusted in line with changes in interest rates.
Why us?
Floating rate income
Focusing on floating rate bonds issued by high yield companies, this innovative fund is designed to provide income that rises or falls in line with market interest rates with almost no duration risk.
A defensive approach
High yield FRNs also provide a relatively defensive approach to high yield investing, with the large majority of bonds ranked senior-secured in the company’s capital structure.
Experienced credit analysts
Careful bond selection is based on a thorough, bottom-up research of individual credits, with the fund manager supported by a large and experienced team of analysts.
More information
This is a marketing communication. Please refer to the prospectus and to the KIID before making any final investment decisions.
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.
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.
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 portfolio.
High yield bonds usually carry greater risk that the bond issuers may not be able to pay interest or return the capital.
The portfolio 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 portfolio will incur a loss. The portfolio’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 portfolio.
Investing in emerging markets involves a greater risk of loss due to greater political, tax, economic, foreign exchange, liquidity and regulatory risks, among other factors. There may be difficulties in buying, selling, safekeeping or valuing investments in such countries.
The portfolio is exposed to different currencies. Derivatives are used to minimise, but may not always eliminate, the impact of movements in currency exchange rates.
Further details of the risks that apply to the portfolio can be found in the Prospectus.