When is a Fund Too Big to Function?

There are 10 funds in the UK with more than £6 billion under management. Do these jugganauts offer economies of scale or is investment restricted by their size?

Emma Wall 11 June, 2014 | 1:48PM

The biggest fund in the UK is £20 billion large - and it's invested in bonds, a less-liquid asset. M&G Optimal Income has £20.4 billion under management, and shows no sign of slowing down.

In fact, the fund is expected to continue to attract cash across Europe – in May it was the most searched for fund on both Morningstar’s Spanish and Italian websites. For those who remember the events of July 2012 this may raise concerns. Two years ago, M&G took measures to control the flow of new money into their UK corporate bond funds. After reportedly turning down a £1 billion institutional mandate, the fixed income team got on the phone to fund platforms and discretely asked them to stop pushing clients’ money their way.

It was around this time that the Financial Services Authority also jumped in – writing to corporate bond fund managers asking for a review of liquidity in the sector and whether the situation could result in investors being denied access to their money.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Invesco High Income UK Inc272.41 GBP-0.40
Invesco Income UK Inc1,064.87 GBP-0.36
M&G Global Macro Bond GBP A Acc153.36 GBP0.40
M&G Optimal Income GBP A Acc213.54 GBP-0.03

About Author

Emma Wall  is former Senior International Editor for Morningstar

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