Assets that investors perceive to be relatively safe from suffering a loss in times of market turmoil.
A group of funds with similar investment objectives and/or types of investment, as classified by bodies such as the Investment Association (IA) or Morningstar™. Sector definitions are mostly based on the main assets a fund should invest in, and may also have a geographic focus. Sectors can be the basis for comparing the different characteristics of similar funds, such as their performance or charging structure.
The creation and issuance of tradable securities, such as bonds, that are backed by the income generated by an illiquid asset or group of assets. By pooling a collection of illiquid assets, such as mortgages, securities backed by the mortgages’ income payments can be packaged and sold to a wider range of investors.
Financial term for a paper asset – usually a share in a company or a fixed income security also known as a bond.
An ownership stake in a company, usually in the form of a security. Also called equity. Shares offer investors participation in the company’s potential profits, but also the risk of losing all their investment if the company goes bankrupt.
Type of fund shares held by investors in a fund (share classes differ by levels of charge and/or by other features such as hedging against currency risk). Each M&G fund has different share classes, such as A, R and I. Each has a different level of charges and minimum investment. Details on charges and minimum investments can be found in the Key Investor Information Documents.
Share class hedging
Activities undertaken in respect of hedged shares to mitigate the impact on performance of exchange rate movements between the fund’s currency exposure and the investor’s chosen currency.
A way for an investor to express their view that the market might fall in value
The practice whereby market participants sell assets they do not own after borrowing them in exchange for a fee from someone who does own them. The short-seller must eventually return the borrowed asset by buying it in the open market. If the asset price has fallen, the short-seller buys it for less than they sold it for, thus making a profit. However, the contrary may also occur.
Short-dated corporate bonds
Fixed income securities issued by companies and repaid over relatively short periods.
Short-dated government bonds
Fixed income securities issued by governments and repaid over relatively short periods.
In French, it stands for société d'investissement à capital variable. It is the western European version of an open-ended collective investment fund, much like an OEIC. Common in Luxembourg, Switzerland, Italy and France, and regulated by regulators in the European Union.
Government debt. Also referred to as government bonds.
A statistical measure of dispersion of a set of data from its mean, indicating the spread of a fund's returns over a certain period of time.
Sub-investment grade bonds
Debt securities issued by a company with a low rating from a recognised credit rating agency. They are considered to be at higher risk from default than those issued by companies with higher credit ratings. Default means that a borrower is unable to meet interest payments or repay the initial investment amount at the end of a security's life.
A swap is a derivative contract where two parties agree to exchange separate streams of cashflows. A common type of swap is an interest rate swap, where one party swaps cashflows based on variable interest rates for those based on a fixed interest rate, to hedge against interest rate risk.
Swing pricing is a method of protecting long-term shareholders in the fund from bearing the costs of transactions carried out by shorter-term investors. When investors buy or sell shares in the fund, the fund manager has to buy or sell underlying securities to either invest the cash obtained from investors, or to provide them with cash in exchange for their shares. Swing pricing essentially adjusts the fund shares’ daily price to take into account the costs of buying or selling the underlying securities held by the fund. This ensures that transaction costs such as brokerage fees and administrative charges are borne by those investors who trade shares in the fund, not by those who remain invested in the fund. (Also see dilution adjustment)
Synthetic inflation-linked bonds
Securities created using a combination of assets to mimic the characteristics of inflation-linked bonds. Such a combined investment can be created by buying inflation-linked government bonds and selling protection against companies defaulting on their debts using credit default swaps. The resulting synthetic investment will behave like a physical inflation-linked corporate bond, had one had been issued. Synthetic inflation-linked bonds are usually created where a company does not have any inflation-linked bonds in issue.