Wealth Manager - the site for professional investment managers

Register free for our breaking news email alerts with analysis and cutting edge commentary from our award winning team. Registration only takes a minute.

Why M&G's corporate bond fund makes A-rated Clive Beagles sad

1 Comment
Why M&G's corporate bond fund makes A-rated Clive Beagles sad

JOHCM UK Equity Income manager Clive Beagles is concerned the retail distribution review (RDR) will only serve to make behemoth funds larger, and is backing Standard Life over Hargreaves Lansdown as a beneficiary of the new regulatory climate.

Beagles, who is Citywire A-rated and a Citywire Selection pick, said platform Hargreaves Lansdown was not currently on his radar as he views its valuation as rich, while highlighting the lack of clarity on the impact the RDR could potentially have for the Bristol-based company.

‘It is not necessarily clear how the RDR works out for them. We own Standard Life, which is a fast performing share and is much cheaper,’ Beagles said.

He also believes there is less downside risk associated with Standard Life in comparison to Hargreaves Lansdown, and is particularly positive about the investment Standard Life has made in its platform and in auto-enrolment solutions.

His comments came ahead of the firm's announcement on Wednesday morning that it has cut 139 jobs across its UK and Europe business.

Commenting on the potential landscape for fund management groups post-RDR, Beagles said he is concerned the RDR will simply cause the large funds that dominate their sectors to grow larger still.

He puts this down to commonality increasing between model portfolios run by wealth managers and IFAs on the back of more stringent due diligence processes. In this space, Beagles owns Aberdeen Asset Management.

‘The largest four to five funds have dominated each individual sub-sector and the RDR accelerates that,’ he said, highlighting the fact that in Asia Pacific equities the top three houses run around 70% of the assets in the sector.

‘Model portfolios created by wealth managers and IFAs have all got the same bloody funds. I think it is quite dangerous,’ Beagles added.

Similarly, he is concerned about the amount of money that has gone into corporate bond funds, particularly the M&G Corporate Bond fund.

‘Equities – regardless of whether GDP growth is 2,3 or 4% - continue to look so much cheaper than the bond alternatives. We all read how much money M&G take on a monthly or quarterly basis and we all know that money is going into their corporate bond-type product.

'That really saddens me. It is not that we want to be running a lot more money, but all the equities we own that have corporate bonds, the equities are yielding more than the corporate bonds and these are equities where the dividends are growing in real and nominal terms.'

'Why would you buy a Centrica 30-year plus bond yielding 4.3% when you can buy the equity on a yield of 5% today and that dividend will grow RPI plus 3-4%? And there are countless examples like that,’ he said.

Elsewhere, the manager remains bullish on domestic-orientated stocks, such as Restaurant Group, and continues to back turnaround stocks 3i and ITV.

Leave a comment!

Please sign in or register to comment. It is free to register and only takes a minute or two.

Related Fund Managers

Clive Beagles
Clive Beagles
11/90 in Equity - UK Equity Income (Performance over 3 years) Average Total Return: 26.90%
Citywire TV
Play Citywire Scotland: how wealth managers use new tech

Citywire Scotland: how wealth managers use new tech

We caught up with a few wealth managers at our annual event in Gleneagles to find out what technological innovations they are employing across their businesses.

1 Comment Play CEO Tapes: Buxton to Gilbert - ‘my Glencore quandary’

CEO Tapes: Buxton to Gilbert - ‘my Glencore quandary’

Do not miss the first two minutes of this film as Richard Buxton shares how he has been challenged by a client for owning shares in a certain company.

Play CEO Tapes: the huge opportunities for asset managers

CEO Tapes: the huge opportunities for asset managers

From tech disruption, retirement and poaching, the CEO discuss the opportunities for their businesses in this episode.

Read More
Wealth Manager on Twitter