M & G Corporate bond holding?

TUVOK

I would appreciate members views on holding the above fund.
I purchased the fund in its accumulation form in 2001 at a cost of £7000-00, it's current price is approximately £21000-00, thus an increase of about 200% on my initial purchase.
The fund is I believe one of the better corporate bond funds available and it has performed well in the past, it is 10% of my overall portfolio value.
I have read various opinions on the continued holding of bonds, not all very favourable.
My query is as well as it has performed what are members views on the continued holding of this fund with regard to the future.
Thanks for any/all replies.


 

george4064

Without any context it doesn’t really matter what others think. If it’s 100% of your portfolio then it’s most likely very inappropriate, however if it forms a small-ish part of a larger portfolio then it’s fine. However even if it’s part of a larger portfolio it may not align with your goals and financial objectives, which we also know nothing about.

At face value I would ditch the fund and invest it into an equity fund, my opinion is that bonds are priced very dearly and hence much more downside risk than upside risk.

Alexland

Bonds have gone up in price as interest rates have reduced but that fund is expensive and there are now better options even if you wanted to continue investing in bonds. Ask yourself how/if these type of bonds fit into your overall asset allocation.

dunstonh

How does it fit with your wider portfolio? As mentioned above, if its 100% of your investable assets then its bad quality investing and has probably cost you a lot of lost return.   If it's just your allocation to investment-grade bonds and you have others covering the other areas then its not so bad.  It's not what it once was and is a below average fund (and has been for some years) and the charges are high for what is just a middle of the road fund.   And as you have held yours for that length of time and it sounds like it is direct with fund house, that means you are on the old retail version which is even more expensive.

coyrls

dunstonh said:

As mentioned above, if its 100% of your investable assets then its bad quality investing and has probably cost you a lot of lost return.

OP Says....

it is 10% of my overall portfolio value.

dunstonh

coyrls said:

dunstonh said:

As mentioned above, if its 100% of your investable assets then its bad quality investing and has probably cost you a lot of lost return.

OP Says....

it is 10% of my overall portfolio value.

It does but its unclear if the rest of the portfolio is property or cash.  I know cash isn't a portfolio but an awful lot of people call their spread of deposits a portfolio.   It just seemed strange to pick out one fund if it was a portfolio of funds and the timescale suggests off-platform (direct with fund house) which would make having a portfolio more complicated and from an era when structured portfolios were rare.

TUVOK

Perhaps some clarification of my portfolio would help?
The "portfolio" is all funds/IT's , I have other amounts in Premium bonds, Fixed rate, notice etc, so the "portfolio" I am referring to is all equities.
It's composed of approximately of : 
Global 33%
Defensive 26%
UK 11%
Us 8%
Shares 8%
H/Care and Tech. 6.5%
Pacific 4%
European 1.5%
Miners 1
I also have two passive portfolios which are split into most investment sectors.
The replies that I have seen are giving me a lot to think on!
The M&G fund is one I took out after my first job closed and I'm afraid to say "it's become part of the furniture", a steady increase, secure, but from the replies, I should have looked at it a long time ago.
Any/more views would be welcomed.

theothersaver

The main problems with bond funds these days are two fold.
1. Yields are so damn low that....

2. ...the cost could take up the entire yield or more

and specifically for corporate bond funds

3. The cost, plus the defaults you'll get, could eat up even more

But then your other options are:

4. Global stocks are in high valuation/arguably bubble territory, but

5. The UK (FTSE 100/250 etc) is cheap but arguably for good reason (I'm bullish on the UK but that's a controversial opinion, to put it mildly). The dividend yield is also probably higher than the yield on your bond fund. The dividends aren't guaranteed, but we've just had the deepest dividend cuts since the 1929-1933 crash. However equity, especially a single country index, is not an appropriate substitute for bonds.

6. Gold is at record highs and not really a defensive investment that can replace bonds.

7. Cash, which may mean withdrawing from your investment account to max out your premium bonds or a savings account.

IMHO as long as you have plenty of cash reserves, I personally see little point holding bonds as a long term investment right now. However, if you're closer to retirement (if this is even for retirement), bonds can add short-term stability, but it depends which bonds or bond funds you're buying, credit quality, duration, costs etc.

For a possibly cheaper and arguably safer bond fund you could look at bond index funds, Vanguard have a decent range, plenty others available.

dunstonh

Historically, conventional investment grade bonds were a risk reducer.     They are not viewed as that currently but they will be again at some point.
If you build your portfolio using a static weighted model (i.e. percentage in each area remains the same irrespective of the economic cycle and data) then you just keep the bond weighting as it should be.
If you build your portfolio using a fluid weighting model (i.e. percentage in each area changes over the cycle) then you adjust the holdings to match the weightings.
So, it depends on how you run your portfolio.  It is the more fluid asset/sector models that have been reducing allocations to investment-grade bonds over the last 3-4 years.   Static ones are not.