The M&G (Lux) Global Floating Rate High Yield Fund is designed for investors seeking an attractive level of income but who are concerned about the negative impact of rising interest rates.

Unlike conventional bonds, which normally suffer in a rising rate environment as their fixed income streams become relatively less attractive, FRNs pay a variable level of income which is regularly adjusted in line with interest rates.

High yield FRNs may also appeal to investors looking for a more defensive approach to high yield, with these assets typically exhibiting lower volatility compared to conventional high yield bonds.

The M&G (Lux) Global Floating Rate High Yield Fund, a Luxembourg-authorised SICAV, launched on 21 September 2018. On 7 December 2018, the non-sterling share classes of the M&G Global Floating Rate High Yield Fund (a UK-authorised OEIC) merged into the SICAV. The SICAV is run by the same fund manager, applying the same investment strategy, as the UK-authorised OEIC.

Generating income without undue interest rate risk
How high yield floating rate notes work

Illustrative example: Providing an attractive income stream as interest rates rise

Delivering a growing income stream in a yield-starved environment

Source: M&G, 2015. *Floating rate coupon automatically adjusted in line with changes in interest rates

The fund provides access to a globally-diversified selection of high yield floating rate notes. While the majority of the fund is expected to be invested in European and US issuers, the fund manager may also invest selectively in other regions, including emerging markets. The fund also seeks to be well-diversified across a variety of sectors.

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.

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. 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. High yield bonds often carry greater risk that the bond issuers may not be able to pay interest or return the capital.

The fund allows for the extensive use of derivatives.

Fund positioning
Well-diversified by region and sector

By region

By sector

Source: M&G, as of 31 March 2019. Please note, portfolio data is based on internal sources, is unaudited and may differ from information as shown in the Monthly Fund Review

M&G have long-running expertise within high yield markets, having invested in these assets since the 1990s. In 1998 we introduced the first high yield bond fund in the UK.

Our large and experienced team of credit analysts allows us to thoroughly scrutinise all aspects of a company’s credit profile and to assess whether bondholders are being adequately compensated for the potential risks. 

Visit the fund page