M&G Retail Fixed Interest funds Performance attribution - glossary

Transcription

1 M&G Retail Fixed Interest funds Performance attribution - glossary Introduction M&G uses Barclays POINT to provide fixed interest attribution analysis for our Retail Fixed Interest funds. This system allows us to identify and quantify the sources of return for our fixed income funds, relative to a benchmark, over a range of time periods. The flexible nature of the system enables us to tailor the attribution output to reflect the differing investment approaches and objectives across our range of funds. This document explains the format of the attribution report and provides definitions of the various terms used. Display The performance attribution is displayed as a series of tables within an Excel spreadsheet. Please note that, because we customise the attribution reports to reflect the individual management approach for each fund, the output will vary by fund. For all funds, however, the attribution follows a basic pattern, whereby the broad level performance data is presented first, followed by a more granular breakdown of the contributors to out/underperformance in subsequent tables. The key contributors to the fund s relative performance are also shown in a bar chart on each report. Contents This document is intended to be consulted alongside the attribution report. For ease of use, please see below a table of contents: Table 1: Performance... 2 Table 2: Performance Details... 3 Table 3: Credit Effect... 4 Table 4: Credit Effect by Sector... 5 Table 5: Duration Effect by Currency... 6

2 Glossary Each report begins with a Global Portfolio Summary, which identifies the following key elements: Portfolio: the specific fund for which the attribution has been created. Benchmark: the index against which the fund s performance has been compared. Please note that the fund in this report is not managed relative to the index shown. Partition: the dataset chosen to demonstrate the fund s out/underperformance (this reflects the relevant sources of return for each fund as identified by the fund manager). Period: the dates covered by the attribution. Base currency: the currency in which the fund s performance is reported. A detailed performance attribution follows, as below. Table 1: Performance Performance Portfolio Return (bps) Benchmark Return (bps) Outperformance (bps) 2.9 Table 1 identifies the Performance of the fund and the selected benchmark for the given time period. This table features three pieces of information: Portfolio Return (bps): the absolute return generated by the fund over the period. Benchmark Return (bps): the absolute return generated by the benchmark over the period. Please note that this is included only for attribution analysis purposes and that the M&G Retail Fixed Interest funds are managed independently of any benchmark. Outperformance (bps): the portfolio s return relative to the benchmark a positive number indicates outperformance while a negative number indicates underperformance. The number in this field is what the rest of the attribution seeks to explain. In the above example, both the fund and the benchmark delivered a positive return over the period covered by the attribution. The fund outpaced the benchmark, registering an outperformance of 2.9 basis points (bps). 2

3 Table 2: Performance Details Performance Details Currency Effect -3.4 Duration Effect Credit Effect 18.3 Table 2, Performance Details, delves deeper into the fund s out/underperformance as identified in Table 1. The information shown in this table varies by fund. There will be a Duration Effect output and a Credit Effect output for all funds. For funds that invest in a range of currencies and can employ hedging, there will also be a Currency Effect output. Currency Effect: the combined effect on out/underperformance of the fund s currency exposures. Duration Effect: the combined effect on out/underperformance of the fund s yield curve exposures. Credit Effect: the combined effect on out/underperformance of the fund manager s active asset class, sector and security decisions (more detail provided in the Credit Effect section overleaf). In this example, the fund s outperformance was driven by the manager s selection of individual bonds, bond sectors and asset classes (+18.3bps). The fund s currency and duration positioning detracted 3.4bps and 12.1bps, respectively, from relative performance. 3

4 Table 3: Credit Effect Credit Effect Asset Allocation 15.4 Security Selection 4.7 Inflation 4.0 Intra-Day -1.8 Others -4.0 The Credit Effect table separates out the individual components of the Credit Effect contribution provided in Table 2. As before, the details provided in this table will vary across the fund range depending on the relevant sources of return for each fund. The list of potential outputs across the funds are: Asset Allocation: the effect on out/underperformance of the fund s positioning across sectors (eg financials, industrials etc.) and asset classes (eg government bonds, investment grade credit, high yield credit etc). Security Selection: the effect on out/underperformance of the fund manager s choice of individual bonds. Inflation: the effect on out/underperformance of the fund s holdings in inflation-linked securities. If the fund does not invest in these assets, this category will not be displayed. Intra-Day: the effect on out/underperformance of trading execution. Residual/Others: any factors that cannot be attributed to the outputs above. In our example, the fund manager s asset allocation, security selection and inflation decisions contributed to the fund s outperformance. These offset a negative effect from the fund s trading and other factors. 4

5 Table 4: Credit Effect by Sector Credit Effect by Sector Bucket name OASD Contrib. (yrs) OAS Change Outperf Port Bench Port Bench Alloc Select Total Insurance-LT2-IG Basic Industry-Senior-HY Telecommunications-Senior Non-Pfandbriefe Covered-Se Mortgage Backed-Subordinat Services-Senior-HY Energy-LT2-IG Comm Mortgage Backed-Subor N/A Banking-LT2-IG Capital Goods-Senior-HY Mortgage Backed-Senior-IG Others-N/A-HY Banking-UT2-IG Banking-Senior-HY Energy-Senior-IG Banking-Tier1-HY Energy-Capital Credit-IG Capital Goods-Senior-IG Cash-N/A-IG Others-LT2-IG Insurance-Tier1-IG Sovereign-Senior-IG Others-Senior-IG Services-Senior-IG Utility-Senior-IG Banking-Senior-IG This table highlights the contribution to out/underperformance of the fund s credit allocation, by sector. The information in the Bucket name column will vary to reflect the different relevant sources of return for each fund. The dataset chosen will be ordered by asset allocation contribution, from the greatest contributor to performance to the greatest detractor. The table also highlights the portfolio s positioning in each sector, the market activity in this sector and the subsequent effect on fund performance: OASD Contrib. (yrs): The Option Adjusted Spread Duration Contribution, measured in years, shows the weighting of the fund (Port) and the benchmark (Bench) in the particular sector identified in the Bucket name column. If the figure in the Port column is greater than in the Bench column, the fund is overweight. OAS Change: the movement in the Option Adjusted Spread, in basis points, for the relevant sector. A positive number indicates spread widening and a negative number indicates spread tightening. Outperf: the effect on out/underperformance of the fund s sector allocation (Alloc) and security selection (Select) for the relevant asset. A positive number indicates a positive contribution and a negative number indicates a negative contribution. In the above example, the fund s overweight in investment grade lower tier 2 insurers was the largest contributor to outperformance (4.7bps). Spreads narrowed in the sector and the fund s holdings outperformed those in the benchmark (OAS change). This resulted in a positive contribution from the fund s sector and security selection. 5

6 Table 5: Duration Effect by Currency The overall contribution to out/underperformance of the fund s duration positioning is captured in the Performance Details table (Table 2). The Duration Effect by Currency table below analyses where this performance came from, by currency, by examining the contribution to returns across a range of key-rate durations: 6 months, 2 years, 5 years, 7 years (for Japanese assets, where they are held), 10 years, 20 years and 30 years. The currencies displayed are those in which the duration effect was largest during the period. Rest: the contribution to out/underperformance from the rest of the yield curve (ie not captured by the keyrate durations). Carry: the contribution to out/underperformance of the overall change in the fund s maturity profile, by currency. Total: the total out/underperformance by currency across the curve. The Performance Details table (Table 2) shows that the effect of the fund s duration positioning cost it 12.1bps of outperformance. The Duration Effect by Currency table demonstrates that this weakness was concentrated in euro assets (-15.8bps), particularly at the shorter end of the curve (6m to 5y). Curve positioning in sterling assets added to relative returns. Duration Effect by Currency 6m 2y 5y 10y 20y 30y Rest Carry Total EUR Outperformance (bps) GBP Outperformance (bps) USD Outperformance (bps) ITL Outperformance (bps) CHF Outperformance (bps) N/A

7 Prices may fluctuate and you may not get back your original investment. This document is designed for investment professionals use only, not for onward distribution to any other person or entity. FOR USE IN THE UNITED KINGDOM AND THE COUNTRIES MENTIONED BELOW: For Switzerland: Distribution of this document in or from Switzerland is not permissible with the exception of the distribution to qualified investors according to the Swiss Collective Investment Schemes Act, the Swiss Collective Investment Schemes Ordinance and the respective Circular issued by the Swiss supervisory authority ("Qualified Investors"). Supplied for the use by the initial recipient (provided it is a Qualified Investor) only. In Spain the M&G Investment Funds are registered for public distribution under Art. 15 of Act 35/2003 on Collective Investment Schemes as follows: M&G Investment Funds (1) reg. no 390, M&G Investment Funds (2) reg. no 601, M&G Investment Funds (3) reg. no 391, M&G Investment Funds (5) reg. no 972, M&G Investment Funds (7) reg. no 541, M&G Investment Funds (9) reg. no 930, M&G Global Dividend Fund reg. no 713 M&G Dynamic Allocation Fund reg. no 843, M&G Global Macro Bond Fund reg. no 1056 and M&G Optimal Income Fund reg. no 522. The collective investment schemes referred to in this document (the "Schemes") are open-ended investment companies with variable capital, incorporated in England and Wales. In the Netherlands, all funds referred to, with the exception of M&G Investment Funds (2), M&G Investment Funds (5), M&G Investment Funds (9) and the M&G Dynamic Allocation Fund, are registered with the Dutch regulator, the AFM. This information is not an offer or solicitation of an offer for the purchase of investment shares in one of the Funds referred to herein. Purchases of a Fund should be based on the current prospectus. The prospectus, Key Investor Information Document (KIID), annual report and subsequent semi-annual report, are available free of charge, in paper form, from the ACD: M&G Securities Limited, Laurence Pountney Hill, London, EC4R 0HH, GB, or one of the following: M&G International Investments Limited, German branch, Bleidenstraße 6-10, D Frankfurt am Main, the German paying agent J.P. Morgan AG, Junghofstraße 14, D Frankfurt am Main, the Austrian paying agent, Raiffeisen Bank International A.G., Am Stadtpark 9, A-1030 Wien, the Luxembourg paying agent, J.P. Morgan Bank Luxembourg S.A., European Bank & Business Center, 6 c route de Treves, 2633 Senningerberg, Luxembourg, the Danish paying agent, Nordea Bank Danmark A/S Issuer Services, Securities Services, Hermes Hus, Helgeshøj Allé 33, Postbox 850, DK-0900, Copenhagen C, Denmark, Allfunds Bank, Calle Estafeta, No 6 Complejo Plaza de la Fuente, La Moraleja 28109, Alcobendas, Madrid, M&G International Investments Limited, 34 Avenue Matignon, 75008, Paris, France or from the French centralising agent of the Fund: RBC Dexia Investors Services Bank France. For Switzerland: Please refer to M&G International Investments Ltd., Bleidenstraße 6-10, D Frankfurt am Main or, for Sweden, from the paying agent, Skandinaviska Enskilda Banken AB (publ), Sergels Torg 2, Stockholm, Sweden. For Italy, they can also be obtained from one of the appointed paying agents, details of which can be found by visiting the contact section on the following website: Before subscribing you should read the prospectus, which includes investment risks relating to these funds. This financial promotion is issued by M&G Securities Limited and M&G International Investments Ltd. Both are authorised and regulated by the Financial Services Authority and have their registered offices at Laurence Pountney Hill, London EC4R 0HH. M&G International Investments Ltd. is also registered with the CNMV in Spain. FOR USE IN ALL OTHER JURISDICTIONS NOT MENTIONED ABOVE (EXCLUDING THE USA): This financial promotion is issued by M&G International Investments Ltd. Registered Office: Laurence Pountney Hill, London EC4R 0HH, authorised and regulated in the United Kingdom by the Financial Services Authority. M&G International Investments Ltd and the funds referred to in this document may not be authorised, recognised or regulated by the local regulator in your jurisdiction. This information is not an offer or solicitation of an offer for the purchase or sale of investment shares in one of the funds referred to herein. September S335. 7