M&G has its own individual asset management style. The company employs very few top-down research analysts but has one of the biggest teams of credit analysts looking at things from the bottom up. This is because "we have a simple view that says it is extremely difficult to tell the future," says William Nicoll, co-head of alternative credit at M&G.
It is an approach that has served the asset manager well. M&G currently manages £143bn ($200bn) of assets on behalf of insurers, including £132bn for parent company Prudential plc and £8bn for 44 external non-life and life insurance clients.
Central to its philosophy is the belief high-quality credit research works best. M&G's 121 research analysts – one of the largest teams in Europe – work with the portfolio managers to identify investment opportunities and create independent ratings.
Credit expertise combined with its insurance heritage allows M&G to take advantage of market mispricing and construct portfolios of bonds suited toward insurer needs, with a focus on what it calls an "appropriate pricing of risk" rather than "market forecasting". Of the parent portfolio, £54bn is in annuity assets which is managed with a targeted return strategy involving a combination of stock selection and credit beta strategies.
The company has also been at the forefront of implementing Solvency II- compliant strategies for its clients. As far back as 2014 it set up a £550m buy-and- maintain mandate for a European general insurer that used the standard formula to calculate capital requirements. And it has built on this success with new inflows from third-parties – in 2017 the company won £1.4bn of new insurance mandates.
The asset manager has also expanded its expertise into newer insurance assets. It started putting money into commercial real estate debt in 2009 and has since invested some £6bn into the asset class. M&G also currently manages about £20bn of asset-backed securitisation assets which includes some £789m of investment from a leading insurance group. And it recently won a £500m segregated mandate from a UK insurance client for this strategy.