M&G launches two-year fixed maturity bond strategy providing opportunity for European investors to lock in attractive yields in global credit

1 March 2024

M&G’s €144 billion AUM Fixed Income investment division is launching a two-year fixed maturity bond strategy aiming to lock in 4.5 percent gross annualised returns. The M&G (Lux) Fixed Maturity Bond Fund 1 seeks to provide European investors a pick-up to European sovereign bonds and cash deposits, the latter which currently yield between 3.1 percent and 3.4 percent for similar tenures.

The global, highly diversified credit portfolio, with an allocation of at least 80 percent of investment grade and 20 percent of high yield bonds, has been designed to capture the opportunity in short-dated bonds created by the inversion of the interest rate curve. The strategy will be managed by Stefan Isaacs, co-Deputy CIO of M&G’s Fixed Income Team and Fund Manager Matthew Russell, both have over 20 years of industry experience, and will be supported by M&G’s dedicated in-house fixed income research team.

Commenting on the launch, Stefan Isaacs said: “With European headline inflation tracking down towards the 2 percent target and the European Central Bank expected to start cutting interest rates later this year, the current environment provides investors with the opportunity to lock in higher rates through fixed maturity bond strategies that are backed by strong research analysis. The ongoing inversion of the interest rate curve allows us to find compelling yields for Investment Grade bonds and High Yield credit across markets while limiting duration risk.”

Neal Brooks, M&G’s Global Head of Product and Distribution, added: “We are seeing strong interest from our European clients in fixed maturity strategies ahead of Central Banks making their next move. M&G’s active approach to fixed income investment is valued by our clients as credit selection is key as companies refinance at this stage in the interest rate cycle. Today’s launch responds to this demand and follows the successful Fixed Maturity Bond strategy, which raised €440 million during its six week subscription period that closed in November 2023.”

The fund is Article 8 under SFDR and will be available for subscription until October 16, 2024.

Source: M&G