M&G Investments has fired the starting gun on what it hopes will become a substantial presence in the active exchange-traded fund market, launching the first products in a new ETF range backed by a £350mn cornerstone commitment from its Life business.
The move signals a strategic shift for the £343bn asset manager as it seeks to deliver its well-known active management capabilities through a vehicle long associated with low-cost passive investing.
The new range aims to bring the firm’s deep research culture, unconstrained investment style and long track record in fixed income and equities into a wrapper prized for transparency, liquidity and efficiency. It also reinforces M&G’s leadership ambitions in the UK while accelerating its push into key European markets.
The initial launch centres on three fixed-income strategies run by portfolio managers Miles Tym and Rob Burrows, part of M&G’s £137bn fixed income division. Together they target outperformance over five-year periods while retaining the flexibility to deviate meaningfully from their benchmarks when valuations or macro conditions warrant it.
The M&G UK Index-Linked Gilts Active UCITS ETF seeks to deliver capital growth and income superior to the UK’s inflation-linked gilt market. Although it uses the iBoxx UK Gilt Inflation-Linked Index as a reference point, the portfolio is unconstrained by that benchmark.
The fund invests primarily in sterling-denominated, investment-grade bonds issued or guaranteed by the UK government. Its unconstrained approach allows the managers to position around shifts in inflation expectations, Bank of England policy and supply-demand dynamics in the linker market, segments of the gilt curve that have seen heightened volatility since the 2022 LDI crisis.
Its sister product, the M&G UK Gilts Active UCITS ETF, follows a similar philosophy but targets the conventional gilt market. Aiming to deliver higher capital growth and income than the iBoxx GBP Gilt Index over five years, it invests at least 90% of its assets in fixed or floating-rate UK government bonds. Here, too, the managers employ a flexible approach, taking positions where they believe gilts are mispriced relative to macro fundamentals or policy expectations.
Across the Atlantic, the M&G US Treasury Bond Active UCITS ETF offers an unconstrained take on the world’s largest government bond market. Its benchmark, the ICE BofA US Treasury Index, is used only for performance comparison; portfolio construction is instead shaped by the team’s views on duration, yield-curve positioning and macroeconomic inflection points. The fund primarily invests in US-dollar-denominated, investment-grade Treasuries and is available in both USD and GBP-hedged share classes, an important appeal for European allocators navigating currency volatility.