The launch coincides with Chinese equity valuations reaching all-time lows whilst companies increasingly focus on boosting shareholder returns.

The M&G China Fund will be managed by David Perrett who has spent more than three decades investing in China and the wider region. He will be supported by Singapore-based deputy fund manager, Jamie Zhou and the wider Asia Pacific equity investment team which manages circa $23 billion in assets across the region.

The M&G China Fund’s investment approach will centre on a universe of circa 300 Chinese stocks, which have been curated following more than 30 years of rigorous coverage and investment research. With a strong focus on risk pricing, the team’s high conviction, bottom-up stock picking approach will leverage its extensive knowledge and network of companies and contacts in the region.

“In our view, China’s stock market capitalisation is currently disproportionately small compared to the size of its economy, with many stocks trading at compelling levels of valuation. At the same time, many Chinese companies are showing improving operational resilience during recent tough times and are increasingly focused on maximising profits and boosting shareholder returns through both higher dividends and share buy-backs,” says David Perrett, manager of the M&G China Fund and co-head of the Asia Pacific equity investment team.

“In addition to ongoing corporate self-help, many Chinese businesses are also leaders in globally growing areas such as renewable energy and digital supply chain-management. We believe our bottom-up stock picking approach, combined with rigorous risk management should enable us to deliver consistent and attractive returns for our investors.”

The team manages sizable mandates investing in Asian and Japanese equities on behalf of M&G Life’s £129 billion With Profits Fund, as it sought to further diversify its geographical allocation. In 2021, they were awarded a mandate to invest in Chinese equities that has grown to $1.14bn. The launch of this Fund is part of M&G’s strategy to make its investment capabilities more widely available to external investors, with a focus on the UK Wealth Management sector as they seek to increasing allocate more globally.

Fabiana Fedeli, CIO, equities, multi asset & sustainability at M&G Investments, added: “Active management is essential for investors who want to capture the long-term growth potential of China, whilst avoiding the pitfalls and volatility of the market. We are delighted to launch the M&G China Fund and provide our investors with this opportunity, led by a team with decades of experience in the region.”

Available to UK investors as a daily dealing fund, the M&G China Fund will aim to provide a higher total return (capital growth plus income) net of OCF than that of the MSCI China with 100% China A Share Index over any five[1]year period. Typically holding between 50-80 stocks, its focus will be on quality companies with strong balance sheets, sustainable cash flows and attractive valuations.

M&G’s Asia Pacific Equities investment team of 13 is led by David Perrett and Carl Vine who manage circa $23bn in assets across various strategies investing in Asia ex Japan, Japan, China and India, and using a bottom up stock selection-led process.

The MPS will initially come to the Parmenion, M&G and Morningstar platforms, with more expected to follow shortly after.

WealthSelect has grown to reach £14bn in assets under management over its 10 years in operation.

It has been managed by portfolio manager Stuart Clark since inception. Bethan Dixon joined Clark in 2022 following an expansion of the range, with Helen Bradshaw also becoming a portfolio manager in 2023.

The MPS began as active and blended portfolios only, but in 2022 passive portfolios and a range of responsible and sustainable investment options were added.

Steven Levin (pictured), chief executive of Quilter, said: “WealthSelect has been a real success story in terms of helping clients achieve their financial goals over the past decade.

“MPS solutions are now a crucial part of the adviser toolkit and we provide one of the most comprehensive solutions in the market. We want advisers to have greater access and choice and thus the time feels right to add WealthSelect to other platforms.”

Clark added: “Despite the challenges the market has thrown up over the years, WealthSelect has continued to deliver good risk adjusted returns. There has been a huge amount of upheaval in the past decade with the likes of the Covid pandemic, Russia’s invasion of Ukraine, the Brexit referendum and the most aggressive rate hiking cycle in history.

“The next decade shows no signs of slowing down, but I am excited to see advisers have even greater access to WealthSelect as we roll it out across the platform market.”

Inflation didn’t miss by much in the US – 3.2% versus 3.1% predicted. In the Eurozone, inflation climbed to 2.9% in December, from 2.4% in November, but was back down to 2.8% in January. In the UK, inflation rose marginally to 4% in December, up from 3.9% in November, after economists had predicted a slight fall.

Nevertheless, it has been enough to trouble the bond markets. The US 10-year treasury yield is back above 4%, and shorter-dated yields have moved even higher. The UK 10-year gilt yield has moved from around 3.5% at the start of the year to just under 4% today and the 2-year from 4% to 4.5%. This disrupts the view that government bonds are a one-way bet for the year ahead.

See also: It’s time for multi-asset managers to ditch bond proxies

The US Federal Reserve has pushed back on market expectations for a rate cut in March, saying that “the committee does not expect it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably towards 2%”.

Nevertheless, most believe that rate cuts are deferred rather than cancelled. Anthony Willis, investment manager on Columbia Threadneedle’s multi-manager team, says: “Chair Jay Powell spoke positively about the progress made so far but said there was a need to have more confidence on the disinflation path”. The Fed is “not looking for better data, but a continuation of the better data” that has already been seen. Powell said that a March cut is not the most likely case, because the committee is unlikely to have hit that level of confidence by then.

“Futures markets are pricing only a 35% probability of a cut in March – though the Fed will have two more inflation data points to digest by then. Powell’s comments suggest that if inflation remains on track, then even if March is not likely, rate cuts are coming soon,” adds Willis.

See also: Facing the inflation dilemma head on

Jim Leaviss, manager of the M&G Global Macro Bond fund, also believes rate cuts are still likely: “Inflation has started collapsing – both core inflation and headline inflation. The numbers that the Fed looks at – core PCE inflation – are back down towards 2%. It is going in the right direction.”

Inflationary risks

That said, Leaviss also believes there may be longer term risks to the current benign inflation picture, particularly in the US. He points out that there is usually a balancing mechanism for government debt. Governments borrow more when the economy is weak; and when the economy is weak, inflation is falling and interest rates are generally coming down as well.

However, he adds, “this relies on a world in which governments borrow more when economies are weak, not where they borrow more to juice an already strong economy.” The US has seen two quarters of 4-5% growth, and its employment market is very strong. Nevertheless, he believes that widespread disgruntlement with rising prices is likely to usher Donald Trump into the White House, and that tax cuts are likely to be his priority once he gets there.

Tax cuts have historically been a significant contributor to rising debt to GDP. Leaviss says Trump’s election is likely to be inflationary and the US government will have to borrow more at higher bond yields.

Inflation protection?

Charlotte Yonge, assistant manager on the Personal Assets Trust, is also alert to the risks inherent in US borrowing: “The US government is spending money like it’s going out of fashion. This has provided a great fillip to growth. The fiscal deficit – the amount by which government expenditure exceeds receipts – was $1.3trn for the first three quarters of 2023, or nearly 5% of GDP.  We have never seen this level of government spending outside of a recession or its immediate aftermath.  On a gross basis, the fiscal outlay relative to the size of the economy is approaching a level consistent with the peak in government support provided during the Second World War.”

She believes this phenomenon is consistent with a multi-decade long trend and is not unique to America.  It is both a symptom and a cause of lower pain thresholds on the part of electorates around the world. She adds: “We expect that the next recession will see a fiscal response on top of a monetary one, such that the benefits extend beyond owners of capital to labour as well. This, as we saw with Covid, is likely to mean inflation for goods and services on top of asset price inflation.  Governments’ increased readiness to respond to economic hardship will help define the shape of the next recession and subsequent rates of inflation.”

The consequence of this shift is likely to be more volatile and structurally higher inflation than we have experienced over the course of the last 10-15 years. In response, the trust now has around 40% in index-linked bonds, mostly in the US. This is well above the trust’s long-term average of around 30%.

For Leaviss, the bond market is still good value, and they are keeping a watching brief on the election outcome. He adds: “The Fed says that long-term interest rates, based on demographics, technology, globalisation, and those long-term factors that determine how much we save and invest, will be around 2.5%. The treasury market thinks it’s more like 5%. We’ve never seen this degree of dislocation.” As a result, he is focusing on longer duration government bonds, believing this is where the opportunity lies.

Bonds markets have re-set since the start of the year and now reflect less optimism on rate cuts and falling inflation. Inflation is unlikely to bounce back significantly, but there are always unpredictable elements, such as the oil price, and markets are jumpy. It can still be the year of the bond, but investors will need to be selective.

This article was written for our sister title Portfolio Adviser

The global investment manager has appointed Amy Cho as head of Asia Pacific and as chief executive of M&G Investments Singapore.

Cho joins from Schroders where she was chief executive Hong Kong and deputy head Asia Pacific.

She has previously worked at Pictet Asset Management, First State Investments, HSBC Asset Management and Citibank.

Evelyn Partners

The wealth management and professional services group has hired Katrina Brown as director of responsible investment.

Brown joins from Morgan Grenfell Asset Management as director of global equities, and will focus on incorporating ESG into investment processes.

Investec Wealth and Investment

The investment service has recruited Kirsty Cartwright as investment director within its Birmingham office.

Kirsty brings 23 years’ experience in the wealth management industry, having previously worked at Barclays Wealth, and Mazars solutions before moving to RBC Brewin Dolphin in Manchester.

Canada Life

The insurance company has appointed Rebecca Gladstone as head of public policy, a newly created role within the chief executive’s office.

Rebecca joins from the Financial Services Compensation Scheme (FSCS) where she was stakeholder and public affairs manager, and has previously worked at FTI Consulting and the Association of British Insurers (ABI).

MWA Financial

The IFA group has promoted operations and integration specialist Marine Deruelle to executive director.

This creates a five-strong board designed to accelerate MWA’s acquisition and integration strategy.

Deruelle brings 8 years’ experience in the financial services industry, having worked at AXA Australia and AMP Limited.

This appointment comes following extensive research carried out by the asset manager which believes that the current market and economic conditions will provide a supportive environment to develop this new offering.

Nicoll starts his new role from today and will report to Piers Hillier chief investment officer at Royal London.

He comes from M&G where he held the role of chief investment officer of private and alternative assets.

Hillier commented: “As part of our continuing commitment to deliver best-in-class investment solutions and services to our clients, we place significant focus on carefully assessing markets to identify where the most attractive opportunities lie and how investors can best access these.

“We believe that private markets have an important role to play in portfolios, with current market conditions providing a very conducive entry point for our business as we seek to expand our range of capabilities into this space.”

Nicoll added: “We are seeing tremendous growth in private markets and I am thrilled to be leading the buildup of Royal London Asset Management’s private assets business. Private markets, with their flexibility and innovation, are going to be a central part of market developments allowing us to transition to a more sustainable future. I am eager to get started and to build a strong private asset offering solutions for our clients which will work for them for decades to come.”