Slowing down M&G Corporate Bond inflows

Investors could be discouraged from investing in the popular M&G Corporate Bond fund, as the fund management group attempts to slow inflows.

Options are also being explored for slowing inflows to the £5.1bn M&G Strategic Corporate Bond fund, also managed by Richard Woolnough.

Both M&G Corporate Bond and M&G Strategic Corporate Bond are funds which appear in the model portfolios we often recommend to our clients. These funds have scored highly when we have applied our quantitative screening to all of the funds in the corporate bond sector.

Size is an important consideration when selecting a suitable investment fund.

Too small and a fund may not be sustainable over the longer term, as the fund is unlikely to be economically viable for the fund management group.

Too big and the fund manager can face challenges implementing their investment strategy. M&G’s Richard Woolnough says that, despite a combined £4bn of inflows to his two funds since May 2011, he has “coped” in this respect.

Stemming the inflows and protecting existing investors in these funds could be implemented with a ‘soft closure’ of the funds, increasing the initial charge to discourage investors.

M&G might also consider asking the big discount fund supermarkets to stop actively promoting their funds to investors.

We will be keeping a close eye on the situation at M&G and will advise our clients accordingly.

Photo credit: Flickr/lukedor