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M&G's French has 'fire in his belly again' as redemptions soar

by Matthew Goodburn on Oct 10, 2013 at 14:18

M&G's French has 'fire in his belly again' as redemptions soar

Global equities veteran Graham French has apologised to investors for underperformance last year as his blockbuster M&G Global Basics fund continues to suffer sustained redemptions. 

French told investors: 'This is the first time in 12 years that the fund has seen redemptions.'

'It is painful but we totally understand. It does mean the big holdings have become even bigger but we have to accept that.'

The fund reached a peak of over £6.6 billion in June 2011 but has gradually fallen away after a period of underperformance. As recently as March 2013 the fund stood at £5.5 billion but by the end of September 2013 it had fallen to £4.4 billion.

Selling resources, buying health care

French was frank in addressing the issues that led to a period of sharp underperformance early last summer after a  huge drop in the share price of  core holding global services group G4S and a collapse in commodity prices affecting holdings, such as Iluka Resources.

He said: 'Last summer G4S was a disaster and it took 2% off performance after it collapsed on the Olympics debacle.'

'We [also] saw a huge collapse in commodity prices too but sold out of all our commodities last summer so we took the pain early.'

'It was a difficult May and June 2012 and we apologise. My money and my parents' money is in the fund and I'm sorry that I misjudged the depth of the management of G4S.'

French said he had 'taken the hit' early after selling five or six  commodity stocks representing 5% of the fund, last summer.

He also admitted to selling out of consumer stock Yum Brands too early, although more recently its share price had started to fall back on fears over slower than expected growth from its KFC franchise in China.

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