Marketing communication
This page contains marketing information
For investors seeking income and diversification, investment grade asset-backed securities (ABS), can offer a differentiated alternative to traditional corporate and government bonds.
Backed by diversified pools of assets such as residential mortgages, auto loans and corporate loans, ABS can provide access to attractive income potential, high credit quality and low sensitivity to changes in interest rates. However, this is a specialist and varied market where rigorous research and active security selection matter.
The M&G Investment Grade ABS Credit Fund provides access to a diversified portfolio managed by one of Europe's most established structured credit teams.
Why consider ABS?
Attractive income potential
Investment grade ABS can offer higher yields than equivalently rated corporate bonds. In our view, this yield premium reflects technical and regulatory factors, as well as the specialist expertise required to analyse the asset class.
Diversification
ABS provide exposure to diversified pools of underlying borrowers and assets, including residential mortgages, consumer loans and auto finance. These different return drivers can complement traditional fixed income allocations.
Historically resilient credit performance
European ABS have demonstrated resilient collateral and credit performance across a range of economic and market environments. Structural protections can also help protect more senior investors, although careful analysis and active security selection remain essential.
Demystifiying ABS
Asset-backed securities are a specialist area of fixed income that can appear more complex than traditional bonds. Understanding how these securities are created and structured is key to understanding the opportunity they present. In this video, our structured credit specialists explain the mechanics of securitisation, how cash flows move through an ABS structure and the features that can help support credit quality. They also explore what differentiates the European ABS market, the role of credit enhancement and some of the factors investors should consider when evaluating the asset class.
Why M&G?
M&G Investments offers an actively-managed approach to investment grade ABS, combining specialist expertise, deep fundamental research and proprietary technology. Having invested in structured credit since the late 1990s, we have spent more than two decades building one of Europe’s most established ABS investment platforms.
Value driven, bottom up investing
We believe the most compelling opportunities in ABS are uncovered through detailed analysis of the underlying collateral, transaction structures and counterparties. This approach helps us identify relative value opportunities and manage risks as markets evolve.
Deep research capabilities
Our dedicated structured credit research team combines deep ABS expertise with the resources of M&G's broader fixed income platform. Through detailed transaction level analysis that extends beyond headline ratings, we seek to identify opportunities and risks that may be overlooked by traditional credit assessments.
Specialist expertise and proprietary technology
With more than two decades of structured credit experience, we combine specialist investment expertise with proprietary technology designed to analyse, monitor and screen thousands of transactions across the global ABS market.
What makes investment grade ABS different from traditional fixed income?
In this video, our investment team shares their views on the evolving European ABS market, how they identify opportunities, and why they believe this strategy can play an increasingly important role within fixed income portfolios. They also discuss our approach and the expertise that underpins our structured credit capabilities.
This is a marketing communication. Please refer to the prospectus and to the KIID before making any final investment decisions.
Investment policy:
- The Fund aims to provide a combination of capital growth and income of between 1-3% a year above the Sterling Overnight Index Average (SONIA), before any charges are taken, over any three-year period. SONIA reflects the average interest rate that banks pay to borrow sterling overnight from other financial institutions.
- At least 80% of the Fund is invested directly in Asset Backed Securities (ABS) that are rated investment grade and denominated in any currency. ABS are securities that have been created by pooling related debts such as mortgages, credit card debt, car loans, student loans, equipment lease, collateralised repo loans and EETCs (Enhanced Equipment Trust Certificates).
- The fund’s recommended holding period is 5 years.
- The Fund’s expected average level of leverage under normal market conditions is 200% of the Fund’s Net Asset Value when calculated in accordance with the sum of notionals approach. The level of leverage could sometimes be higher under certain circumstances including but not limited to changes in the reference market conditions and the investment strategy.
The main risks associated with this fund:
- 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.
- ABS are complex securities that pool underlying loans and credit agreements. Their value and the risk of not receiving back all proceeds will be affected by interest rates and the ability of the underlying debtors to repay their agreements.
- The fund can be exposed to different currencies. Movements in currency exchange rates may adversely affect the value of your investment.
- Further details of the risks that apply to the fund can be found in the fund's Prospectus.
It is also important to note that:
- The fund allows for the extensive use of derivatives.
The team
Matthew Wardle
Head of Investment Grade Structured Credit
Harry Bullamore
Fund Manager
Scott Ellerby
Fund Manager
Joseph Rice
Fund Manager
Celine Essar
Associate Investment Specialist
The views expressed on this webpage should not be taken as a recommendation, advice or forecast.
The value of investments will fluctuate, which will cause prices to fall as well as rise and you may not get back the original amount you invested. Past performance is not a guide to future performance.
M&G Investment Management Limited (MAGIM), M&G Alternative Investment Management Limited (MAGAIM), M&G Securities Limited (MGSL) and M&G Financial Services Limited (MGFS) are registered in England and Wales under numbers (936683, 2059989, 90776, 923891) respectively. The registered address of MAGIM, MAGAIM, MGSL, and MGFS is 10 Fenchurch Avenue, London, EC3M 5AG. MAGIM, MAGAIM, MGSL, and MGFS are authorised and regulated by the Financial Conduct Authority (“FCA”) under numbers 119328, 122011, 122057, 122058 respectively.