In celebration of its one-year anniversary, M&G’s Phil Butler, Portfolio Manager, and Olivia Trevor, Investment Manager Oversight Analyst, lift the lid on the successful PruFund Planet range – and tell IFA Magazine all about how the funds cater to both the needs of the client and the planet.
IFA Magazine: Can you briefly remind our readers what the planet fund range is about and why it appeals to advisers and their clients?
OT: PruFund Planet is very similar to PruFund in that we have five Risk Managed funds each with a different risk profile – giving you that benefit of smoothing. The range is also managed by the Treasury & Investment Office (T&IO) team, to give clients diverse multi-asset exposures. The defining aspect of the PruFund Planet range is that, as well as the benefits from a smoothed investment process, it also has an additional lens on ESG, sustainability, and impact. Furthermore, PruFund Planet aims to deliver positive environmental and societal outcomes in addition to financial returns. There are three categories of outcome which are:
- Mitigating Environmental, Social and Governance (ESG) risks and minimising negative outcomes
- Pursuing Environmental, Social and Governance (ESG) opportunities
- Investing in positive outcomes for disadvantaged groups or stakeholders
PB: We feel we have achieved a lot in the first year of PruFund Planet’s launch. We are very pleased to report that the range has been well received by advisers and is seen as a natural evolution of the existing product range. Other important milestones include that it is now on M&G Wealth platform. The range has also seen good relative performance in tough market conditions and its portfolios have regularly been enhanced – enabling it to be so successful.
IFA Magazine: Why is the PruFund Planet range different?
OT: PruFund Planet is unique in that it is able to build upon PruFund’s size and scale and can therefore utilize the T&IO’s expertise in asset allocation and fund selection; this means that it is helping to satisfy the client’s needs as well as the needs of the planet (i.e., the environmental and social areas we mentioned previously).
This is extremely beneficial, firstly, because it has meant that expert asset managers – who are leaders in their fields – have worked on the range and built bespoke solutions in line with the ESG framework. Secondly, due to the scale of the existing business, including PruFund, the range was able to obtain private assets that other competitors do not typically have access to.
Ultimately, we wanted to give clients the choice and flexibility to invest in a product that suits them; we feel that PruFund Planet achieves this and as mentioned previously, is a natural progression of the existing PruFund range.
IFA Magazine: How much of a challenge is it to get good sustainability data to help you make investment decisions?
PB: There is lots of data in the market and it is constantly improving all the way from the bottom to the top – i.e., from the underlying businesses to the data collators. At M&G we have made a commitment to put sustainability at the heart of everything we do – as a result, we feel confident in our ability to select the best managers in this space.
In addition, we actively incorporate ESG into our asset allocation and fund selection decisions – and we are able to rely on the expertise and insights of the T&IO’s experienced ESG team, which enables us to make judgments and/or question the data as it evolves. However, the most important factor is having strong teams both within T&IO and our underlying managers – as this ensures that we can make the best decisions on an active basis.
IFA Magazine: We know that these are funds for long-term investors, but what has the relative performance been like vs. the sector since launch?
PB: We have been very pleased with performance since launch. PruFund Planet investors, for the year to date to the end of July 2022, would have achieved a return in the region of between -2.0 and -4.5% (depending on the fund invested in). This is certainly positive when you compare this with the IA mixed sectors – which have seen returns of between -7 and -8%. Overall, performance has been good on a relative basis, compared to other sustainable strategies, as well as against a wider peer group of funds that don’t have sustainability as a core value.
We see this performance being driven by two main factors:
- The underlying managers
- The smoothing mechanism of the funds
The smoothing mechanism has largely – although not completely – shielded clients from volatility; we have still seen some downward UPAs (Unit Price Adjustment). If we look at the wider picture, markets have been extremely challenging, in part due to the appalling conflict in Ukraine – but also because of investor and client worries around high levels of inflation, increasing interest rates, and fears of a potential recession. This has led to sectors that don’t naturally lend themselves to ESG performing particularly well (e.g., oil and gas, defence, and tobacco) and has been a natural headwind for ESG thematic funds. Despite this, we are – as you say – long-term investors at M&G, and we ultimately believe that these stocks will indeed do well over the longer term.
OT: To echo what Phil mentioned earlier – if we compare PruFund Planet to the peer group, our funds have held up particularly strongly, and we’re extremely pleased with performance both within asset classes and as a multi-asset proposition. Therefore, we’re confident that when headwinds dissipate (i.e., the non-ESG sectors currently doing well), there will be strong potential for this fund range – which we find very exciting.
To give IFA Magazine readers a flavour of the range, I’ll highlight a couple of the underlying thematic funds that have delivered strong relative performance so far. A key example is Wellington Global Impact Bond – a core tenet of our Fixed Income exposure – which we developed with Wellington to be bespoke to the asset allocation needs of PruFund Planet. As the fund has an Impact focus, it tilts towards quality and, for example, government-related bonds that are linked to building infrastructure and positive outcomes for society. As a result, the fund has performed well in this market environment.
The second fund to highlight is the M&G Positive Impact Fund. This is another core exposure within PruFund Planet – and was also one of the first positive impact funds to be launched in the market. Due to the team’s experience investing in this market, and their focus on the quality of stock selection, the fund continues to perform well amongst Positive Impact peers, despite being negatively affected by weak markets.
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