M&G International Investments Switzerland AG

M&G (Lux) Conservative Allocation Fund - Evaluating three years of the strategy

April marks three years since M&G’s Multi Asset team first introduced the concept of a portfolio invested in mixed assets focused on growing capital with a cautious approach. Initially launched as a UK-authorised OEIC in April 2015, the M&G Prudent Allocation Fund later merged into a Luxembourg-authorised SICAV, the M&G (Lux) Conservative Allocation Fund, in March 2018. In that time, the strategy has consistently demonstrated its ability to find opportunities in different market environments.

The value of investments and the income from them will rise and fall. This will cause the fund price, as well as any income paid by the fund, to fall as well as rise, and you may not get back the amount you originally invested. Changes in currency exchange rates may affect the value of your investment.

Tactically navigating volatility…

Three years is a long time in financial markets. In the past three years, we have seen a range of economic environments, some favourable for the strategy, some less so. But the strategy’s flexibility has been demonstrated by the way that we have been able to consistently apply its investment approach during this time.

In April 2015 memories of the global financial crisis were comparatively fresh. Nonetheless, when we launched the strategy, sentiment was actually broadly confident. Indeed, global equities were reaching the peak of a reasonably sustained bull run. However, what followed was a period of heightened volatility and swiftly changing sentiment, making for a turbulent first year for the strategy and a very challenging trading environment.

However, we were able to recognise that this volatility was presenting us with some interesting opportunities. We adjusted the portfolio in an attempt to take advantage of situations where we felt investors’ emotions, rather than economic facts, were driving irrational market movements. We took the opportunity to tactically increase the fund’s exposure to equities, generally in markets away from the main focus of newsflow. On each of these occasions, these markets bounced back strongly over the following weeks and months, rewarding our decision to add to the positions.

We believe this approach will serve us well in 2018 if, as expected, the markets continue to experience volatility.

Investors should remember that past performance is not a guide to future performance.