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M&G Episode Income

Elite Rated by FundCalibre

This multi asset fund invests directly in individual stocks and bonds, while property exposure is gained by investing in property funds. The name “Episode” refers to those periods of time when investors’ emotions cause them to act irrationally. The manager uses behavioural finance to find pockets of value and invest against the herd rather than following it.

Company Description

Founded in 1919, M&G Investments employs more than 1,500 people worldwide. The company, owned by Prudential plc, which is listed on the London Stock Exchange, focuses primarily on fixed interest and equities, but also invests in multi-asset and real estate. Its fund managers have an average tenure of 11 years, although many have been with the company for more than 20 years. Managers are given freedom to implement their own style on funds.

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Fund Manager

Steven Andrew joined M&G in 2005 as a member of the portfolio strategy and risk team. He is now a key member of the episode multi-manager team. In November 2010, Steven was appointed manager of the Episode Income fund. Before joining M&G, he worked at F&C Asset Management, Merrill Lynch and the Bank of England. Steven graduated from the University of London in 1997 with a degree in financial economics.

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Our edge is in understanding the emotional sources of volatility .

Steven Andrew - Fund Manager

The Investment Process

The episode multi-manager team continually assess a broad range of macroeconomic data and share and test investment ideas. The manager of each fund then chooses the ideas he likes best for his portfolio. Attractive valuations are always the starting point and by identifying market ‘episodes’, they are able to buy and sell holdings that reflect their views at advantageous prices.

Risk

Risk is primarily controlled through simple diversification. This diversification also allows the manager to produce a stable level of income. Asset allocation is the strength of the team and, for each equity region, they construct a basket of holdings. No position will account for more than 0.75% of the portfolio, which means individual holding risk is low.

Our Opinion

Team-managed funds are de rigueur these days but the episode multi-manager team have two strong differentiating attributes. They constantly look for value created by investor irrationality and then take positions that reflect those views. Investing directly into stocks and bonds gives them greater liquidity within the fund, as well as keeping costs down. This fund is particularly pertinent at the moment when the search for income has led to many investors chasing the same ideas.

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