Morningstar has praised M&G's Richard Woolnough for effectively managing the rapid growth of his Corporate Bond fund but has expressed concerns the fund's TER is well above the category median.
The £4.19bn fund has now been awarded a ‘Superior' rating from the agency which highlighted Woolnough's ability to shift the fund's very large book of assets at key turning points.
These included the move to cut bank exposure and increase duration in 2007 and early 2008 which resulted in excellent relative returns, according to Morningstar.
However, fears were raised about the TER on the fund, which at 1.17% is a lot higher than the category median of 0.88%.
"Fees are another concern-such a large fund should benefit from economies of scale, but this fund's TER is well above the category median," Morningstar says.
Woolnough has run the Corporate Bond fund, which is his most constrained retail fund, since March 2004. He managed to deliver top quartile performance every year apart from 2009, when the fund was second quartile.
Morningstar also noted the number of holdings in the fund increased to more than 300 issuers. This was due to a lack of liquidity in credit markets and the very large size of the portfolio.
Morningstar says Woolnough would prefer to have fewer names in the fund but was not willing to sell holdings unless a reasonable bid/offer spread was achievable.
Retail charges on the fund are 3% initial with a 1% AMC.
Woolnough also runs the more aggressive M&G Strategic Corporate Bond fund and the unconstrained Optimal Income fund. In total, M&G funds account for approximately 15% of the sterling bond market.
