Richard Woolnough, manager of the £21bn M&G Optimal Income fund, has highlighted four areas of fixed income where he is finding opportunities in the current environment.
Speaking at an investor conference, the manager said he continues to see a "great deal" of value in credit.
His four favoured areas of the fixed income market are currently financials, long-dated US telecoms, hybrids (which are trading at a premium to senior secured bonds), and eurozone sovereign bonds issued by Italy, Spain and Portugal.
"We added to eurozone peripheral sovereign bonds during the French election, these are looking historically attractive versus corporate credit," Woolnough said.
"Financials were exceptionally good value versus high yield at the start of the year, so we think they are attractive."
Six of the largest issuers of bonds held in Woolnough's £21bn portfolio are banks: Bank of America, Lloyds Banking Group, HSBC, J.P.Morgan, Morgan Stanley and BNP Paribas.
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Woolnough is also particularly keen on the telecoms sector, saying this industry "is the future", adding they offer a way to access investment grade exposure, which he prefers to more "expensive" high yield.
The manager holds 3.6% in bonds issues by Verizon Communications in the portfolio, and 3.5% in AT&T issues.
The fund is currently overweight investment grade corporates, holding around 60% in this asset category, and underweight high yield at around 15%.
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Woolnough also retains his long-term preference for short duration in the portfolio, sitting at an average duration of two years.
The M&G Optimal Income fund has returned 13% over three year to 20 September, according to FE, in line with the IA Sterling Strategic Bond sector average.
