Fund in Focus: M&G Recovery

The Value Investor: It has been a tough few years for M&G Recovery but manager Tom Dobell has rewarded investors with stellar performance over the long term

Emma Wall 23 January, 2014 | 5:02PM
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Investors should be mindful of being too short-termist. Stock brokers BestInvest yesterday named and shamed a list of "dog" funds, they considered the worst-performers in the pack. 

Among them was Tom Dobell's £7 billion M&G Recovery fund - because it failed to beat the benchmark over three consecutive 12 month periods. But the fund did deliver positive returns – and it has a long term track record of consistently protecting investors’ capital.

Adrian Lowcock, who now works for rival firm Hargreaves Lansdown but used to compile the Spot the Dog fund list when at BestInvest thinks this addition may have been a little hasty. 

"It has been a tough few years for the M&G Recovery fund as investors’ heightened risk aversion and preference for ‘quality’ stocks has been a headwind for the fund," he said.

"However styles fall in and out of favour in stock markets and during the difficult years it is important a manager remains focused on their investment strategy to ensure investors benefit when the style returns to favour."

And Morningstar analysts agree - awarding the fund an illustrious Gold rating. The fund predominantly invests in companies that are in recovery situations and, in particular, companies that have undergone management changes or have underperformed the market. This means it is perfect for the value - or contrarian - investor. 

In order to help you master the art of contrarian investing has launched a new weekly series where we will highlight a stock, fund or investment trust which our analysts believe to be trading at less than its fair value.

Every Thursday we will reveal the holding's star rating and Morningstar analyst rating; which determine whether it is fairly valued, how it has performed and whether it is likely to outperform its peers in the future.

This week we reveal what Morningstar analysts think of M&G Recovery.

M&G Recovery

M&G Recovery continues to demonstrate why we think so highly of it, said analyst Chetan Modi.

This fund benefits from its impressive stability in management: Since it was launched just three managers have guided it over its 43-year lifespan. Current manager Tom Dobell took charge in March 2000 and is supported by deputy managers David Williams and Michael Stiasny. Dobell also leans on several teams at M&G, including the equity analysts, credit teams, and corporate finance team.

The resulting portfolio is usually contrarian in nature and features stocks across the market-cap spectrum. We note the significant amount of assets under management and the liquidity implications for small- and mid-cap stocks, which account for around half of the portfolio.

Dobell has rewarded investors with stellar performance over the long term and despite the significant asset growth over his tenure, we have not seen a negative impact on performance thus far. Furthermore, we believe that Dobell has the resources to deal with the fund’s sizeable assets. The fund retains its Gold rating.

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

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About Author

Emma Wall  is former Senior International Editor for Morningstar