Policy changes to M&G (Lux) Optimal Income Fund
M&G (Lux) Investment Funds 1 (the “Company”) notified us of changes to its M&G Optimal Income Fund. These changes took effect 6 April 2026 (the “Effective Date”)
- LU1670723722 - M&G (Lux) Optimal Income A Acc CHF Hgd
- LU1670724373 - M&G (Lux) Optimal Income A Acc EUR
- LU1670725347 - M&G (Lux) Optimal Income A Acc USD Hgd
(Together the “Fund”)
SUMMARY OF CHANGES
The company have amended the Fund's investment policy to remove its ability to invest up to 20% of its net asset value ("NAV") in equities in order to clarify the Fund's focus on fixed income (or bonds). As a result of the removal, the Company have also:
- amended the Fund's investment objective to refer to exposure to income streams in ‘global bond’ markets, rather than ‘investment’ markets, as the basis for achieving returns;
- increased the minimum amount the Fund can hold in debt (fixed income) securities from 50% to 70% of its NAV; and
- lowered the maximum amount the Fund can hold in cash or near cash from 50% to 30%.
In addition to the above, as at the Effective Date, the Fund's benchmark (used as comparator against which the Fund's performance is measured) has changed to Bloomberg Global Aggregate Index EUR hedged.
The Company have said that the Fund's investment strategy remains unchanged and the Fund retains its categorisation as Article 8 under the Sustainable Finance Disclosure Regulation ("SFDR"). There is no material change to the Fund's liquidity and risk profile, and no immediate changes to the Fund's portfolio as a result of the changes.
REMOVAL OF EQUITIES FROM THE FUND'S INVESTMENT UNIVERSE
The Fund was originally launched in 2018 with the aim of providing a combination of capital growth and income based on exposure to optimal income streams in investment markets, with a minimum of 50% of its NAV invested in debt securities and up to 20% of its NAV which may be invested in equities. Since then, the Fund's investment universe has evolved considerably and the significance of equities as a source of returns for the Fund has decreased, with equity exposure declining steadily over time and representing less than 1% of the Fund's NAV over the past three years.
The Company believe that this change clarifies the Fund's focus on fixed income and makes its strategy easier to understand for investors, without compromising the Fund's ability to deliver its objective. In order to reflect the Fund's fixed income focus, its investment objective has been revised to specifically refer to global bond markets. Finally, the Fund's investment policy has been amended to remove references to investing in equities and to adjust the permitted asset allocation as per the table below:
| Amount the Fund can actively invest in (as % of its NAV) | |||
|---|---|---|---|
| Equities | Debt Securities | Cash and near cash | |
| Before the Effective Date | Up to 20% | At least 50% | Up to 50% |
| As at the Effective Date | 0% | At least 70% | Up to 30% |
Though the Fund will no longer be able to actively invest in equities, there may be circumstances when it could hold equity assets as a result of corporate actions or restructuring, as provided for in the Fund's investment policy. This provision also applies to any equities that remain in the Fund's portfolio since the Effective Date, and as such the fund manager will seek to sell these assets to the extent possible and deemed in policyholders' best interests.
CHANGE OF BENCHMARK
The Fund's performance was compared to a ‘composite’ benchmark made up of three equally-weighted indices representing investment grade corporate bonds, global high yield bonds and global treasury as follows:
- ⅓ Bloomberg Global Aggregate Corporate Index EUR hedged
- ⅓ Bloomberg Global High Yield Index EUR hedged; and
- ⅓ Bloomberg Global Treasury Index EUR hedged.
The Bloomberg Global Aggregate Index EUR hedged index (the “Index”) has now replaced the above composite benchmark for the Fund. The Index provides a simpler and more comprehensive comparator that incorporates global government, corporate and securitised bonds at investment-grade level across multiple currencies and sectors.
For further information and comparison of the changes, please see the Appendix in the M&G Notification opposite.
These changes have taken effect automatically and policyholders do not need to take any action.
For more information regarding M&G (Lux) funds please visit: https://www.mandg.com