Currently head of fixed income at Schroders and member of the firm’s Group Management Committee, Chorlton will join the business later this year and will report to Joseph Pinto, CEO of M&G Investments.

Chorlton (pictured) has more than 25 years of experience in fixed income markets managing teams of experienced, high performing fund managers. He has direct portfolio management experience in Global Fixed Income, US multi-sector and credit strategies in both Europe and the US. In the role he has held since 2020, he has been responsible for a global division of investment, research, risk and product professionals.

He has led the development of multiple innovative strategies and client solutions across many areas of Fixed Income including sustainability, quantitative credit, semi-liquid credit, emerging market debt, tax-aware and opportunistic strategies into markets around the world including the launch of active ETF strategies in the US.

M&G said Leaviss has spearheaded the company’s growth in Fixed Income, with the team widely recognised as a leading active manager in the asset class, managing £139 billion in assets on the behalf of international investors. Under his leadership, it said he had been responsible for building a global fixed income platform, including developing one of largest credit research teams in the industry; launching innovative investment products to account for the evolution of bond markets; and the development of the next generation of investment talent.

He also launched the Bond Vigilantes blog in 2006, to share the team’s views on the things that matter to bond investors – inflation, interest rates and the global economy – as well as to talk about the bond markets themselves.

Pinto said: “I would like to take the opportunity to pay tribute to Jim whose influence in the world of bonds has been significant – he should be extremely proud of his career at M&G and of the dynamic and talented team he has nurtured. Jim has delivered excellent returns for our clients and his unique way of communicating has always been very engaging with clients, by sharing the team’s insights straight from the desk. When Jim leaves later this year, he will go with our thanks for his contribution and our very best wishes as he pursues academic interests.

“With Andrew’s vast experience as both a fund manager and as a leader, we have appointed a Fixed Income heavyweight who will lead this highly experienced team at a time where we expect significant opportunities to materialise within bond markets as the rate cycle starts to move. We are excited by the opportunity to capitalise on the growth of our global fixed income platform by making strategies managed for our internal insurance client more widely available to our growing international client base, including global banks, family offices, pensions funds and insurance companies in the UK, Europe and Asia-Pacific.”

Leaviss, said: “It’s been a tremendous privilege to work at M&G for almost three decades and lead the team through the growth of bond markets during that time. I’m really proud of our team of fixed income professionals, the talent we’ve developed and what we’ve achieved for clients. Innovation is embedded into our culture, with the business having launched the UK’s first corporate and high yield bond funds, and how we communicate with clients with the launch of the Bond Vigilantes blog in 2006.

“Our investment range has grown dramatically, of note the launch of the M&G Optimal Income Fund which became one of the largest funds in Europe and our leading European credit capabilities that have an excellent reputation with international clients. I’d like to thank everyone for their support over the years and I am in no doubt that this culture will continue – I wish the team all the best.”

Chorlton said: “I have enjoyed over a decade at Schroders both in New York and London and am proud of the strong fixed income platform that has been built. I wish them well for the future as I embark on the next stage of my career. I have long perceived M&G to be one of the leading Fixed Income managers and a strong competitor throughout my career given its history in the asset class.

“The team’s presence has been further amplified through their ability to bring bond markets to life and make fixed income engaging through their innovative way of communicating with clients and a wider audience. It is an honour to take on this role at a time when investors are increasingly seeking active managers with a global perspective built on a foundation of proprietary research to take advantage of the opportunities that present themselves in the bond market as clients’ need for income continues to grow.”

M&G’s £139 billion Public Fixed Income is a global platform with teams in the UK, Europe, USA and Asia. The team manage a range of strategies across Investment Grade Credit, High Yield Credit, Government Bonds, Emerging Market Debt, Absolute Return, Flexible Credit, Multi Asset Credit and Annuities. M&G launched the UK’s first pure corporate bond fund in 1994, the UK’s first high yield Corporate Bond Fund in 1998, the M&G Optimal Income Fund in 2006, and established its Asia Fixed Income capability in Singapore in 2022.

Leaviss remains in role and will leave in the autumn following a smooth transition and handover of responsibilities.

M&G further announced forthcoming changes to the management responsibilities of the firm’s Global Macro Bond strategy, with Eva Sun-Wai and Rob Burrows becoming co-lead managers. The changes will take effect from 1 August 2024 and are part of the firm’s succession plans following the announcement that incumbent co-manager Jim Leaviss is to leave M&G to pursue personal interests in academia.

Eva Sun-Wai, has been co-manager of the strategy since January 2021, alongside Leaviss, and is also the lead manager of the Global Government Bond strategy, having joined the firm in 2018. Rob Burrows is a fund manager specialising in Government bond and macro fixed income mandates and joined M&G in 2007.

This flexible global bond strategy aims to provide a combination of capital growth and income by investing at least 80% of its assets in bonds issued by governments and companies from anywhere in the world, including emerging markets. The selection of bonds as well as exposure to markets and currencies are based on in-depth analysis of individual bond issuers, combined with an assessment of global, regional, and country-specific macroeconomic factors.

Alex Matcham, Head of UK Wholesale Distribution, M&G Investments, said: “Jim launched this fund in 1999 and over its almost 25-year history, he has delivered investors with excellent returns in this dynamic strategy, whilst the bond markets themselves have evolved and the universe has grown. It is testament to Jim and our culture of talent development within M&G that we are able to transition the management responsibilities to Eva and Rob, who will be supported by the broader team of investment professionals who have so consistently delivered outstanding performance for our clients over many years.”

In a separate statement on 8 July, Schroders announced announces the creation of its fixed income (FI) leadership team.

This will comprise Julien Houdain (Head of Global Unconstrained FI), Patrick Vogel (Head of Credit, Europe), Lisa Hornby (Head of US Multi-Sector Fixed Income), Abdallah Guezour (Head of Emerging Market Debt and Commodities), Patrick McCullagh (Global Head of Credit Research) and Andrew Moscow (Head of Fixed Income Management).

They will lead their respective areas and be responsible for the delivery of Schroders overall FI platform. Patrick McCullagh, Global Head of Credit Research, will be responsible for our unified and differentiated bottom-up research across the platform.

The statement said: “Andy Chorlton is leaving Schroders and we wish him the best in his future endeavours. As a result of the creation of our FI leadership team, Andrew’s role will not be directly replaced.

“Given Andy’s focus on business strategy and execution, rather than fund management, there will be no impact on clients, investment team or process.”

Johanna Kyrklund, Schroders co-head of investment and group CIO, said: “Schroders is committed to exceptional client outcomes through active management of their funds. The skills and unique insights of our managers allow us to identify and capitalise on investment opportunities for clients in a highly competitive market.

“Schroders’ fixed income team manages over £100bn of clients’ assets across our global operating platform We have a strong team-based investment approach and a robust investment process dedicated to managing our clients’ portfolios.

The five global portfolios will target ‘best-in-class’ passive ESG-rated equities and bonds. Each model’s equity allocation will vary from 100% to 20% and will invest across a range of regional equity funds and/or two fixed income funds.

The equity element will invest in the Amundi SRI PAB equity funds, which track MSCI SRI Filtered PAB regional indices. These focus on the top 25% ESG-rated companies relative to their sector peers and have a wide range of systematic environmental- and social-based exclusions – for example, they exclude companies generating revenue from thermal coal mining or oil and gas extraction.

These indices also align with the EU Paris-Aligned Benchmark (PAB) regulation minimum requirements, including: a reduction in carbon intensity by 50%, compared to the underlying investment universe; and a reduction in carbon intensity by 7% on an annualised basis.

Meanwhile, the SRI fixed income element invests in two bond funds managed by Northern Trust Asset Management, which track Solactive Global Bond ESG Climate indices. These are focused on a global investment grade bond universe that is screened for ESG scores and carbon emissions, including targeting a 50% reduction in corporate bond carbon intensity compared to the parent index. EBI added risk in the SRI bond element is reduced by blending the two fixed income funds to target a shorter duration than the wider market.

See also: Pacific, Albemarle and Hymans Robertson model portfolios added to Parmenion platform

Jonathan Griffiths (pictured), investment product manager at EBI, said: “We know investors seek to invest in line with their values, while also seeking competitively priced investment solutions. With the launch of the SRI portfolios, we are in the sweet spot where these two elements align. Providing enhanced ESG screening, and market-leading equity exposure aligned with the EU Paris-Aligned Benchmark minimum requirements, these portfolios are an exciting addition to our product suite and the wider MPS space.”

Ashkan Daghestani, head of ETF, indexing, and smart beta sales for UK & Ireland at Amundi, added: “We are pleased to be selected by EBI, which will enable more and more UK investors to have access to our low-cost SRI index-based solutions. This partnership demonstrates our commitment to meeting the needs of UK investors, in particular for ESG index solutions at competitive pricing.”

EBI is part of Bristol-based platform Parmenion and has £2.5bn in assets under management. It runs a range of passively managed investment products including a Core ESG and Earth range for sustainable investors, and factor-based global portfolios, the World range, and Core, for market-based global exposure.

This article was written for our sister title ESG Clarity

Fixed income strategies Aegon High Yield Bond and BlueBay Emerging Market Unconstrained Bond were among the funds to receive the rating, which recognises strategies the FundCalibre research team believes to be the best among their asset class peers.

FundCalibre research director Juliet Schooling Latter noted the £611m Aegon fund’s “excellent” track record in recent years, which has seen it placed among the top quartile of performers in the IA Sterling High Yield sector over one, three, and five years, according to FE Fundinfo data.

Elsewhere, Ashoka India Equity Investment Trust was also commended by Schooling Latter.

She said: “Launched in 2018, this trust invests in Indian companies of all sizes. The trust adopts a stock-picking approach to target scalable businesses with sustainable superior returns on capital. Aided by a huge bank of experienced research analysts, the trust has comfortably been the best performer in its sector since inception.

“We like the trust’s unique approach to stock selection and its ability to go deeper into both the mid and small-cap markets. A highly unconstrained vehicle, we also like its approach to ESG, specifically governance, which can be a critical issue in India.”

See also: Lindsell Train, Invesco and Schroders managers join 2024 FE Alpha Manager list

Fidelity Asian Smaller Companies fund manager Nitin Bajaj was commended by FundCalibre for his clear philosophy and wealth of experience investing in the region.

“This is a genuine stockpicking fund with an emphasis on buying good businesses at prices discounted by the market. The fund has a contrarian ‘value’ bias and high active share. Risk is considered in absolute terms rather than relative to any benchmark or peer group,” Schooling Latter noted.

Comgest Growth America was commended for its “clear process” and “experienced management team”. The $990m strategy has achieved top quartile returns in the IA North America sector over one, three and five years.

Meanwhile, the £257m Martin Currie Global Portfolio Trust was also highlighted for its long term performance.

“The trust’s manager, Zehrid Osmani, has proven himself to be an excellent manager of high conviction strategies. The highly-driven research approach has proven to be extremely successful over the longer term across a range of portfolios and we see no reason why this cannot continue on this trust,” Schooling Latter said.

See also: Investors increasingly eyeing alternatives as volatility fears rise

Ninety One Diversified Income, which launched in 2012, is designed to either replace or complement bonds in a portfolio. The majority of the fund is held in fixed income assets, while it also incorporates strategic equity positions.

“We also like the team’s use of future options and swaps to hedge equity, duration and credit risk,” the FundCalibre research director added.

Four funds were also handed the ‘Elite Radar’ badge, which is awarded to strategies that are on the research team’s shortlist and could receive an Elite rating in the future.

The strategies receiving the rating were Artemis Leading Consumer Brands, GQG Partners US Equity, Man GLG Dynamic Income, and Redwheel Biodiversity.

This article was written for our sister title Portfolio Adviser

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 asset class failed to record a single month of positive flows, with investors pulling £668m in December.

Money market funds, meanwhile, were the only asset class to achieve positive net flows in 2023 as investors put a net £248m into the asset class in December and £4.1bn across the year as a whole.

In December, investors favoured sustainably-labelled funds, which recorded a modest £5m net inflow compared to the £1.7bn that leaked out of non-sustainably labelled strategies.

Sustainable funds recorded £1bn net inflows for the year as a whole, while investors retrieved £27bn from non-sustainably labelled funds.

See also: Revealed: All the winners of the IA Best Practice Adviser Awards

Passive offerings continued to attract cash, pulling in a net £1.9bn in December and £21bn over the year. In contrast, active managers were hit with a £3.9bn outflow in the month and £46.7bn in 2023 as a whole.

This was mirrored in the flows recorded by individual fund groups. Passive providers such as BlackRock (£6.5bn), Legal & General (£2.8bn) and Vanguard (£2.9bn) all recorded strong inflows, while active managers such as Royal London (£8.6bn) and Baillie Gifford (£7.1bn) suffered outflows in 2023.

The top five strategies for inflows in December were all index funds, with the £10.9bn iShares North American Equity Index fund pulling in £409m.

At the other end of the scale, the £4.8bn iShares Corporate Bond Index saw £536m net outflows in the month, the largest of any single strategy.

This article was written for our sister title Portfolio Adviser