The demerger of M&G from Prudential in 2019 meant that the oldest UK fund management business was to be restored to independent status, but in an era of mammoth fund houses and the growth of passive investing, can the company that launched the first unit trust in the country in 1934 survive?
As with so many other companies of its size in the UK, takeover speculation swirls around the firm, with Schroders and Australian bank Macquarie reported to have looked at the investment company.
But M&G has also been an acquirer of businesses, taking over advice firm Sandringham and the Ascentric platform.
In the most recent set of results, M&G chief executive Andrea Rossi spoke of a desire to reduce the company’s cost base by £200mn, with a particular focus on cutting costs within its asset management business.
He says the aim will be to achieve these cost cuts through “digitalisation, reducing layers of management and simplifying governance”.
One wealth manager, who did not wish to be named in order to protect business relationships, says an issue with M&G in recent years has been the company’s tendency to rely on high-profile individual fund managers, an approach which many other firms have abandoned in favour of emphasising a house style and a team-based approach.
The wealth manager says: “There is no house style, so it is all about the individual managers. They toyed with the notion of star managers — which never works for big houses — letting Tom Dobell on Recovery and Richard Woolnough on Optimal gain very high profiles (and pay packets). Both have not ended well.”
Dobell ran the M&G Recovery fund until 2020. Its assets shrank from £6.4bn in 2014 to £1.2bn at the time the fund manager quit. Woolnough brought headlines upon the company when it was revealed that in 2013 he was paid £17.5mn, and sums higher than that in subsequent years.
Woolnough runs the M&G Optimal Income strategy, which at one time was the largest fund in the UK, with its initial growth driven by the manager having exited bank bonds shortly before the global financial crisis, meaning his then small fund performed strongly and grew to have assets of more than £23bn by 2018, a year in which he was paid £16.6mn.
At around the same time that Woolnough’s fund was growing, two of M&G’s equity flagships, the Global Basics fund and the M&G Recovery fund, went into a tailspin. Both strategies were heavily exposed to commodities, and when prices declined so the performance of those funds also fell.
The Global Basics fund also went through several manager changes and it eventually changed its name to Global Themes.
Ben Yearsley, investment director at consultancy Fairview, says the equity fund offering at M&G struggled for many years “but has turned a corner in recent years”.
Chelsea Financial Services managing director Darius McDermott says: “We are fans of the fixed income team, and of the global dividend fund. But more generally, the equities side of the business has changed a lot over the past 10 years. There is a lot more focus within it now and the improvement in investment performance has come with that.
