M&G Recovery Fund

Backing the underdog

The M&G Recovery Fund was launched in 1969 as a vehicle for investors to grow their long-term savings.

The fund has stood by the same investment approach throughout its 42-year history. Citywire AA rated Tom Dobell, who became fund manager in March 2000 aims to seek out companies that, for reasons such as operational difficulties or financial troubles, are unloved by the market but have the potential to recover over the long term.

The fund adopts a long-term, patient investment approach, typically holding each stock for around three to five years – happily longer if Tom believes there is more recovery to come.

Tom believes that in-depth analysis and close contact with company management are required in order to identify recovery potential. He will never invest in a company without first meeting the people who run the business.

The Recovery Cycle:
The fund invests in companies with the expectation that they will progress through a four-stage corporate recovery cycle, as illustrated in the diagram below. Companies that have fallen out of favour and are experiencing problems, but which also exhibit recovery potential, are held through the different stages of the cycle until their turnaround is complete. The fund’s approach is to be a constructive shareholder, often working closely with management to help companies reach their full potential. This approach has remained unchanged throughout the fund's history.

Reasons to invest

• The M&G Recovery Fund is focused on corporate and not economic recovery – a strategy designed to seek out investment opportunities whatever the market conditions.
• It has a proven and unchanged philosophy of investing in unloved and undervalued companies, which Tom believes have the potential to recover and deliver compelling returns over the long term.
• The Fund has ranked in the top 10% of the IMA UK All Companies Sector over the past five and ten years.
• The strategy behind the M&G Recovery Fund is one of consistency – the fund has had only three managers at the helm since its launch over 42 years ago.
• Tom also benefits from the support of an experienced, hands-on corporate finance team, working closely to develop and maintain a constructive, two-way dialogue with the companies in which he invests.

How has the M&G Recovery Fund performed?

• The fund has achieved an average annual return of 15.2% since its launch in May 1969 compared with a return of 10.7% for the FTSE All-Share Index over the same period.
• The M&G Recovery Fund has outperformed the FTSE All-Share Index in 30 calendar years, making it one of the most consistent performers in the UK market.
• Since Tom Dobell began managing the fund in March 2000, he has achieved a return of 111.4%, outperforming the sector by 57.6%.

Please remember that you should not base decisions on past performance, prices may fluctuate and you may not get back your original investment.

Source of all performance figures: Morningstar Inc., and M&G Statistics, bid to bid, net income reinvested, Sterling Class A Shares as at 31 October 2011.

All ratings as at 31 October 2011. Ratings should not be taken as a recommendation.